UPI Meets Credit: AU Small Finance Bank Unveils AU KOSMO Card With ‘Credit on UPI’ Feature

AU Small Finance Bank has launched its latest innovation in digital payments—the AU KOSMO Credit Card, equipped with the newly enabled ‘Credit on UPI’ functionality. The announcement, made on September 21, 2025, positions AU SFB among the first wave of banks to integrate credit card usage directly into the Unified Payments Interface ecosystem, following the Reserve Bank of India’s directive to expand UPI’s scope beyond debit accounts.

This launch marks a significant leap in India’s digital credit landscape, allowing users to make UPI-based payments using their credit line, thereby combining the convenience of QR-based transactions with the flexibility of short-term credit.

Key Highlights From The Launch

- AU KOSMO Credit Card allows payments via UPI using credit instead of debit  
- Cardholders can link their AU credit card to UPI apps like PhonePe, Google Pay, and Paytm  
- No need to carry physical cards or swipe at terminals for merchant payments  
- AU SFB becomes one of the first small finance banks to offer Credit on UPI  
- Launch aligns with RBI’s push for broader credit inclusion through digital platforms  

How Credit On UPI Works

The AU KOSMO Credit Card is designed to function seamlessly within the UPI framework. Once linked to a preferred UPI app, users can scan merchant QR codes and authorize payments using their credit card balance. The transaction is processed as a credit purchase, and the amount is added to the cardholder’s monthly billing cycle.

This eliminates the need for point-of-sale terminals and enables credit-based transactions even in remote or cash-heavy markets. The feature is especially useful for micro-merchants, service providers, and urban consumers seeking frictionless payment options.

Card Features And Benefits

- Zero joining fee and lifetime free usage for early adopters  
- Up to 1.5 percent cashback on UPI-based credit transactions  
- Interest-free period of up to 50 days on UPI purchases  
- Real-time transaction alerts and spend tracking via AU 0101 app  
- Enhanced security with tokenization and biometric authentication  

AU SFB has also confirmed that the AU KOSMO card will be eligible for EMI conversion on select transactions, making it a versatile tool for both daily spending and larger purchases.

Strategic Implications For AU Small Finance Bank

The launch of the AU KOSMO Credit Card reflects AU SFB’s commitment to digital innovation and financial inclusion. By integrating credit into UPI, the bank aims to:

- Expand its credit card base among digitally active customers  
- Tap into Tier II and Tier III markets where QR payments dominate  
- Reduce dependency on physical infrastructure for credit card acceptance  
- Align with India’s evolving fintech ecosystem and regulatory roadmap  

AU SFB has already seen strong adoption of its AU 0101 mobile banking platform and expects the KOSMO card to further boost engagement and cross-sell opportunities.

Market Response And Competitive Landscape

Industry experts have welcomed the move, noting that Credit on UPI could redefine consumer behavior by making credit more accessible and intuitive. While larger banks like HDFC and SBI have begun pilot integrations, AU SFB’s early rollout gives it a competitive edge in the small finance segment.

The bank’s shares remained stable post-announcement, with analysts projecting increased fee income and card activation rates in the coming quarters.

Looking Ahead

With the AU KOSMO Credit Card now live, AU Small Finance Bank is poised to play a pivotal role in India’s digital credit transformation. As UPI continues to evolve into a multi-layered payment infrastructure, innovations like Credit on UPI will likely become mainstream, offering consumers more choice and control over their financial transactions.

The bank plans to expand the feature to corporate and co-branded cards by early 2026, and is in talks with fintech partners to enable merchant-level analytics and loyalty integrations.

Sources: Economic Times, Moneycontrol, AU Small Finance Bank Investor Desk, RBI Circulars