The lack of interest stems from the absence of clear incentives and widespread awareness. Banks may hesitate because of the complexities of credit risk management, while merchants question whether the demand justifies the integration effort. Many users are unsure how a credit line differs from regular UPI payments. Without full-bodied marketing and demonstration of its unique value, the product struggles to gain traction.
The regulatory environment and associated compliance costs can deter banks and Fintech firms from actively promoting UPI credit lines. The fear of defaults and a lack of strong mechanisms for recovering loans further complicates the situation. To make this product appealing, participants need clearer frameworks, risk mitigation strategies, and a concerted effort to build trust among users and merchants.
