UPI vs. Cards: What Should Merchants Prioritise?

Ask a small Indian business which payment method matters most and the answer is usually UPI. Ask a hotel, an electronics retailer or a software company and cards come up quickly. Both answers are right, because UPI and cards solve different problems. The useful question isn't which is better, but which your customers use for what you sell, and what each asks of your business.

The differences that matter to a business are less about technology and more about who the customer is, how the payment is authenticated, what happens when something goes wrong, and whether it can repeat.

Almost every digital payment in India needs two factors of authentication. For UPI that's the customer's phone and UPI PIN. For card payments online it's usually an OTP. At a physical counter, RBI allows contactless card payments up to ₹5,000 per transaction without the additional factor, a limit in place since 1 January 2021; above that, the customer enters a PIN.

RBI's 2025 Authentication Directions also list tap-and-pay UPI on NFC-enabled point-of-sale machines among the exemptions, so tapping a phone on a terminal can work without a PIN within the rules for that facility. Whether your terminals and customers' apps support it depends on your provider.

Subscriptions, instalments and memberships need a payment that repeats without the customer checking out every time. Both UPI and cards support this through e-mandates under RBI's framework: the customer registers a mandate with authentication, is notified before each debit, and can cancel it. For bank accounts, NACH mandates do the same job and suit larger amounts.

If recurring revenue is central to your business, check which mandate types your provider supports before you choose, not after.

Card payments come with a formal dispute process: a cardholder can dispute a payment through their issuer, and you're asked for evidence under the card network's rules. UPI complaints are raised by customers through their bank and UPI app. Either way, the evidence that helps is the same: order details, delivery proof and your published refund policy.

Refunds work best when they go back through the original method, tied to the original payment, so both you and the customer can see what happened.

What each method costs you depends on your agreement with your provider, the payment type and your business. Government rules have set zero merchant charges for some payment types; ask your provider which apply to you now, and compare offers on your real mix of payments rather than a headline rate.

Start with your customers, not the rails.

Most businesses end up offering both. The work is in presenting them in the right order, measuring success rates by method, and reconciling them together.