How RuPay is giving a tough fight to Visa and Mastercards of the world

Before Rupay, Indian banks had to pay high fees of International card networks (Mastercard, Visa). And since there was no domestic player, this was also a security issue.
The Indian payments ecosystem was vulnerable to western sanctions. The absence of a domestic card player forced RBI in its Payments Vision 2009-12 to create an indigenous digital payment ecosystem in India.
• In 2011, close to 50%(557 Million) of the Indian population did not have a bank account due to a high Minimum Balance of ₹3-5k which was not affordable for the unorganised sector. To resolve this Govt. introduced Jan Dhan Yojana in 2014, through which the govt.
issued RuPay debit cards to its new account holders.
• In 2020, the Finance Minister instructed that RuPay should be the only card to be promoted by PSU banks, due to which a total of 258 million RuPay debit cards were issued in 2020 alone.
• Indian banks had to pay a quarterly membership fee to international networks like Mastercard & Visa. But with RuPay, operating costs were lower since no such fee was charged. This made banks choose RuPay due to its lower costs..
• In 2020, Govt. eliminated all Merchant Discount Rate (MDR) charges on RuPay debit cards and UPI, which meant no fees could be levied to merchants for transactions on these networks.
Along with this, all Indian companies with an annual turnover >₹50 crores had to offer RuPay payment options to their customers.
• One-third of 777 million Indian online consumers shop internationally, and half of these transactions are with the US and China.
To increase customer reach & international acceptance, RuPay initially partnered with Discover Financial Services(DSF) of the US, Japan Credit Bureau (JCB), and Union Pay of China.
• It is NOW accepted in more than 200 countries! In fact recently, NPCI signed an MOU with France for the acceptance of RuPay and UPI.
• Since MasterCard was storing data internationally, it increased the risk of data robbery. It was non-compliant with the RBI’s directions on Storage of Payment System Data and banks moved to RuPay and Visa cards. It has re-entered the market but it has lost valuable momentum.
• RuPay has introduced initiatives like Kisan Credit Card and PUNGRAIN for the betterment of farmers, and unlike other networks, RuPay has included small, cooperative and rural banks, which wouldn’t have been possible otherwise.
Despite the impressive growth of RuPay in the Indian debit card market, it lags behind in the credit card space with less than 20% market share.
The credit card segment is all set to grow 3x in the next couple of years. The value of credit card transactions is much higher & more lucrative than that of debit card transactions for banks as well due to higher fees and possibility of interest income.
Thus, Visa and Mastercard have a significant upper hand over RuPay in the credit card segment. They are preferred by customers due to the international network access, extra benefits and the better payment experience that it provides.
However, RuPay is slowly expanding into the premium customer segment and is also focussing on internationalisation. Since its inception, Rupay has issued around 603.6 million cards by nearly 1,158 banks as of 2020 and has expanded exponentially!
Instead of being just a tool for financial inclusion, RuPay has become a leading card payment network system in one of the fastest growing economies.

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