Over the past 70 years, the 3 “X 2” plastic credit card has remained largely unchanged in his wallet. Recently, the ecosystem of RBI, Banks, NBFC, NPCI and Fintech innovators came together to create the Goldilocks conditions to reinvent the plastic credit card in its digital form.
The mobile phone is replacing plastic, while tokenization, UPI and wallet transactions enable the transfer of funds through the merchant ecosystem via an online acceptance network / NFC / QR / Mobile Number. Even more, with the widest possible UPI network, digital credit cards – like vCard ™ – have enabled payments to merchants as well as personal transactions; from the corner grocery store / plumber / friends and family.
A digital credit card with UPI payment works just like a Google Pay / PhonePe app – except that the latter works like a “debit card” where money is deducted from users’ bank accounts; while the former offers up to 30 days money back.
With such an open payment network, digital credit cards can serve as a true instrument of personal finance – functioning as a 30-day line of credit for the entire monthly budget, reducing reliance on emergency personal loans, by cases of late pay / financial emergencies.
Keeping a financial lifeline for all types of monthly expenses – thus getting a 30-day “ refund window ” – is the most important benefit of a digital credit card with UPI. Plus, a digital credit card comes with a wealth of continuous innovation, which can’t be matched by plastic credit cards.
Ease of installation
Traditional credit card applications that were only a few pages long have been replaced with a 30-second application and approval. Digital KYC via Aadhaar avoids the need for complex address proofs, salary proofs, phone and physical verification. When the plastic credit card application takes 15-30 days for the card to be approved, a digital credit card can be set up in one sitting
Ease of use of the card
While plastic cards can be used at around 15 lakh outlets, digital credit cards with UPI Payments can be used for payment to over 15 individual and commercial bank accounts. A UPI-based digital credit card can be used for shopping Rs 20 in the morning, Rs 200 fuel in the afternoon, Rs 2000 online shopping in the evening and Rs 20,000 rent payment for the house – all with over 30 days refund.
Unlike a regular plastic credit card, which is only used for certain merchant transactions, a UPI digital credit card can be used for the entire monthly budget; and thus obtain a single invoice at the end of the month. Since the UPI-based digital credit card has no connection with the savings account, there is no need to manage the funds for large or small payments.
All over the world, plastic credit cards have aligned themselves with the esoteric construction of reward points to satisfy customers – often requiring an expenditure of Rs 1 Lakh to get 1000 reward points which in turn would convert into Rs benefits. 200 under complex conditions. Such rewards are an anachronism in today’s environment of instant gratification. Often the offers shown on plastic cards are bundles with multiple limitations and terms of actual use.
Digital credit cards can offer vouchers, cash backs, and spending waivers instantly rather than accumulating reward points. Additionally, digital credit cards can tailor rewards and benefits based on customer spending behavior and preferences.
Contextual customer support / reminders
Traditional credit cards have familiarized customers with painful customer support with 30-minute jingles and a complex IVR-based menu. Often times, the urgent support needed for a declined transaction or delayed payment can lead to frustrating wait times.
A digital credit card can be obtained through instant pop-up chat support which can be used to resolve 90% of support requests. Additionally, a digital credit card can be set up for relevant reminders for refunds to minimize delays. In addition, it can set reminders for utility bills, quarterly / annual payments like insurance premiums; or one-time payment reminder to a friend
While digital credit cards dramatically improve the customer experience, its backend provides better security with every transaction. Specifically, plastic cards are known to be phished / cloned / misplaced – a digital credit card resides in the mobile phone and is never given to the merchant. The card implements multi-factor authentication on the mobile – where even if the mobile phone is lost, an MPIN prevents the card application from being accessed by unauthorized users.
Likewise, high value transactions can be authenticated instantly via a secret question or video verification.
Digital credit cards – especially with UPI payments – are set to significantly change the customer experience with continuous innovations over the next few years. With broader payment options, better rewards, and increased security, it’s just a matter of when and not if customers will primarily switch to digital credit cards.
The writer, Vishal Ranjan, is founder and CEO of vCard. Opinions expressed are personal