RuPay is used to issue debit, credit, and prepaid cards and can be used for both contactless offline and online transactions. RuPay has issued 600 million cards, but no data is available on the market share of card issuers. RuPay’s primary competitors in the space are Visa, MasterCard and American Express. All three have a long history and were instrumental in developing the digital ecosystem in India.
But the Reserve Bank of India’s (RBI’s) rules on storing data locally favours NPCI, which has almost monopolised mobile payment through its unified payments system (UPI). Public sector banks, as a rule, now issue only RuPay debit cards, but with international acceptance, RuPay is making inroads into the credit card space as well, a traditional playing ground of Visa, MasterCard and American Express. After Sitharaman’s call, private and foreign banks might also issue more RuPay cards.
It is difficult for payments services providers to challenge RuPay and NPCI, but they hope they can remain relevant in India’s hugely underpenetrated market.
At the launch of HDFC Bank’s SmartHub Merchant Solutions 3.0, a mobile-based payments system for small and medium merchants, T R Ramachandran, group country manager, India and South Asia for Visa, said personal consumption expenditure (PCE) accounts for roughly 60 per cent of India’s $2.8 trillion economy. However, digital payments constitute less than 18 per cent of PCE, which leaves “huge ground to cover for all of us”.
“India is a large country and unlike in the West, where it is a zero-sum game, where someone has to lose for someone to win, I would argue that it takes all kinds of players — domestic, international — to develop infrastructure. Because that fosters innovation and customer choice, and we all have our roles to play,” Ramachandran said, when asked for a comment on the push for RuPay.
Legal experts say Visa and MasterCard might not have enough grounds to challenge this. “The finance minister is pragmatically and rightfully promoting RuPay card and this should be seen as one with high persuasive value. It should be noted that there is no direction that any other card cannot be issued,” said Abhishek A Rastogi, partner at Khaitan & Co.
“Only when a direction comes that no other card can be issued, could there be a challenge. But not at the stage of promotion,” Rastogi said.
Private banks, too, have been caught off guard. On the one hand, they cannot snub the country’s finance minister by not promoting RuPay. On the other, being private, they have no reason to listen to the government on who they chose as payment partner.
Generally, private banks decide cards for different customer segments in advance. And, Visa, as well as MasterCard, have contracts to issue a certain number of cards. Hence, banks have to honour those contracts, said a banking source.
“So, we will have to see how it plays out because right now there is uncertainty over what the FM has said. Unless there is a regulation backing this, it is not clear how banks have to adhere to this,” the source said.
Last year, a similar controversy erupted with zero merchant discount rate on RuPay cards and UPI, but it took several months to get implemented because there was a lot of back and forth on the decision.
“And then the law was changed. So, unless there is such a change in regulation, banks cannot be asked to do this. While local products should be promoted, we should not go to extremes on this,” the source said.
Visa says competition offers innovation, choice to customers
Global payments major Visa responded to the government's push for adoption of RuPay cards, saying presence of all kinds of players fosters innovation and offers customers a choice. A day after Finance Minister Nirmala Sitharaman
asked banks to “only promote” RuPay cards, Visa's country manager for India and South Asia T R Ramachandran said that digital payments penetration is very low in India at only 18 per cent of overall personal consumption expenditure. PTI