Will UPI cash deposit facility render debit cards irrelevant?

Will the RBI’s (Reserve Bank of India) latest decision to allow UPI (Unified Payments Interface) for cash deposits at ATMs (Automated Teller Machines) result in debit cards losing their relevance? The once ubiquitous debit cards are already slowly giving way to UPI.

While the share of mobile payments has more than doubled in the last three years, usage of debit cards for payments has remained stagnant during the timeframe, RBI data showed.

RBI’s latest decision to enable cash deposit facility through UPI at ATMs will only hasten the process of a complete switch from card-based transactions to fully mobile/ digital payments, according to top officials in digital payments infrastructure business.

With this announcement, customers no longer have to carry their debit cards for depositing cash at the CDMs (cash deposit machines). Customers can now withdraw money from ATMs through UPIs in a simple process. Cash deposits through UPIs would be similar to cash withdrawal, say experts.

Payments using mobile phones have jumped from around ₹150 lakh crore in 2021-22 to about ₹307 lakh crore in 2023-24. But payments made with debit cards remained stagnant hovering between ₹31 lakh crore and ₹32.9 lakh crore during the last three years.

Debit cards started making their mark in India at the turn of the millennium. With ATM becoming more common, their usage has increased exponentially in the last 25 years. There are over 1 billion debit cards in usage in the country now.

“With this move from the RBI, the debit card journey will come to a complete halt and it might only be used in international transactions for the next few years,” said Atish Shelar, Chief Operating Officer, TechFini, a Mumbai-based fintech firm providing payment infrastructure solutions in association with NPCI (National Payments Corporation of India).

“The need to carry a plastic card has come down for low value transactions,” said Rahul Jain, Chief Financial Officer, NTT Data Payment Services India, a leading payments solutions provider. “With the adoption of tap and pay, we will see a surge in mobile-based transactions. Since UPI is very convenient for consumers, transactions will continue to grow,” he said.

“The usage of debit cards has already gone as it was severely hit by UPI's popularity,” Shelar said. “This (cash deposits using UPIs) however seems to be a good move as it will further reduce the usage of debit cards which will bring down the costs associated with the card,” he said.

“It will be exciting to see if NPCI can replace the debit cards. International players like Master and Visa will be pushing the RBI/ government to change the regulations or help them integrate with UPI. If the government allows them to integrate, their debit cards will surely be replaced by UPI,” Shelar said.

The increasing acceptance of UPI would also impact ATMs (Automated Teller Machines), payment industry officials said. “In the near future, we might see that ATMs will also vanish and merchants will take over the cash withdrawals and deposits thus further reducing the cost of the overall transactions,” Shelar stated.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.