DOES UPI EXPANSION CANNIBALISE OR COMPLEMENT CREDIT CARD USAGE? EVIDENCE FROM INDIA'S DIGITAL PAYMENTS ECOSYSTEM

Abstract

India's digital payments landscape has undergone a transformative shift over the past decade. The Unified Payments Interface (UPI), launched by the National Payments Corporation of India (NPCI) in 2016, has emerged as the dominant retail payment mechanism in the country, processing billions of transactions monthly and fundamentally altering consumer payment behaviour. Simultaneously, the credit card industry in India has recorded consistent growth in both outstanding cards and transaction volumes. The convergence of these two trends raises a critical and underexplored question: does the exponential expansion of UPI cannibalise credit card usage by substituting it as the preferred payment method , or does it complement credit card adoption, particularly through the integration of RuPay credit cards on the UPI platform introduced in 2022? This research project, titled "Does UPI Expansion Cannibalise or Complement Credit Card Usage? Evidence from India's Digital Payments Ecosystem," seeks to investigate this relationship empirically using publicly available secondary data from the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI). The study is positioned as a contemporary management research contribution at the intersection of financial technology, consumer finance, and digital payment systems. Background: The rapid rise of UPI has disrupted traditional payment hierarchies in India. Zero-cost peer-to-peer and peer-to-merchant UPI transactions have largely displaced cash and debit card usage for small and medium-value payments. However, the impact on credit cards , which serve a distinct function as a credit instrument, reward vehicle, and high-value transaction medium , is less clear. The 2022 integration of RuPay credit cards with UPI has further blurred the boundaries between these payment instruments, potentially creating a new growth channel for credit card adoption while simultaneously intensifying competition with existing credit card networks. Research Problem: Despite the growing importance of both UPI and credit cards in India's financial ecosystem, there is limited empirical research examining the directional relationship between UPI transaction growth and credit card usage patterns. Policymakers, banks, and payment networks require evidence-based insights into v whether these instruments are substitutes or complements , a question with significant implications for product strategy, regulatory design, and financial inclusion. Objectives: The study aims to: (1) analyse the trend in UPI transaction volumes and credit card usage patterns in India over the study period; (2) examine the relationship between UPI transaction growth and credit card transaction frequency; (3) assess the impact of UPI expansion on credit card outstanding numbers and new card issuance; (4) evaluate the effect of RuPay credit card integration on UPI on overall credit card transaction volumes; and (5) determine whether UPI and credit cards function as substitutes (cannibalisation) or complements in India's digital payments ecosystem. Research Methodology: The study adopts a quantitative research design using secondary time-series data sourced entirely from publicly available databases , primarily the RBI Payment System Indicators and NPCI monthly UPI data. The key variables include monthly UPI transaction volume and value, credit card transaction volume and value, credit card outstanding numbers, and RuPay credit card transaction data post-2022. Analytical methods include trend analysis, Pearson correlation analysis, and Ordinary Least Squares (OLS) regression to examine the relationship between UPI expansion and credit card usage metrics, controlling for macroeconomic variables such as GDP growth and digital infrastructure penetration. Key Anticipated Findings: The study anticipates finding a nuanced relationship: UPI expansion is expected to show a negative relationship with low-value credit card transactions , consistent with the cannibalisation hypothesis for small-ticket payments , while simultaneously showing a positive relationship with the overall credit card user base, particularly following the RuPay-on-UPI integration. This dual pattern would suggest that UPI and credit cards are neither pure substitutes nor pure complements, but occupy distinct segments of the payment spectrum with partial overlap. Significance: This research contributes to the limited empirical literature on payment instrument competition and complementarity in emerging digital economies. For banks and card issuers, it provides strategic insights into product positioning in a UPI dominant environment. For policymakers and regulators, it offers evidence on the ecosystem effects of payment innovation. For the broader fintech industry, it advances the understanding of how new payment rails interact with established credit instruments in a rapidly evolving market. vi The report is structured across seven chapters: Introduction, Literature Review, Research Methodology, Analysis and Discussion, Recommendations, Conclusion, and References. The study utilises entirely free, publicly available secondary data and is submitted in partial fulfillment of the requirements for the degree of Master of Business Administration at the Delhi School of Management, Delhi Technological University.