Rupay v/s Visa- India’s Local Rival Raises Concerns for The US Giant

Banking has become effortless with the advent of debit cards and credit cards. Gone are those days where banking meant standing in long queue. Most of the banking needs like withdrawal of cash , transferring money , doing shopping everything can be done with the help of debit cards . Also purchasing on credit system is possible with the help of credit cards.

Before we get in to the story lets understand basic concepts

What Is Debit Card And Credit Card?

Debit Cards are plastic cards which can be used for numerous purpose like withdrawing cash from the ATM, shopping at retail stores , transferring money to another person account , making all bill payments. When we use debit cards the amount gets automatically debited from our bank account to which it is linked. If there is no balance in the account debit card cannot be used. Credit Cards are also plastic cards wherein a specific limit is provided to the account holder against which the customers can purchase any necessary items of their need on credit basis . The amount can be spent up to specified limit only. The account holder needs to repay the amount later on failing which interest is levied for delayed payment. There is no need that balance should be there in the account for using credit cards .

Which Are The Popular Debit Cards And Credit Cards in India

Rupay

RuPay is the Indian brand of credit and debit card system of payments, launched by the National Payments Corporation of India. IDBI Bank has launched RuPay debit cards and soon RuPay credit cards will be launched SBI along with Rupay Prepaid by Sodexo, RuPay prepaid smart card by IRCTC

Visa

Visa brand of cards offers transactions worldwide and most commonly through credit cards and debit cards. Visa debit and credit cards are accepted worldwide, Most of the major banks in India used Visa as payments technology company like SBI and ICICI bank.

Mastercard

Mastercard is an American corporation that take care of payments between merchants and card issuing banks, The brand includes both debit and credit cards.

Maestro

Maestro is debit card brand owned by Mastercard, The type of card is issued by most major Indian banks such as Oriental Bank of Commerce and Syndicate Bank

JCB

JCB has partnered with RuPay merchants in India, National Payments Corporation of India and JCB have launched international RuPay JCB credit cards in Mumbai. The Indian travelers cardholder will get the benefit of JCB card payment in Japan, Hawai, Singapore, Hongkong and Bangkok.

Diners Club

Diners Club International offers charge cards owned by Discover Financial Services. In India, the Diners Club Cards are only available with HDFC Bank and used for travel, shopping, entertainment or groceries at selected stores.

Visa Complains To U.S. Govt About India Backing For Local Rival Rupay

Visa Inc has complained to the U.S. government that India’s “informal and formal” promotion of domestic payments rival Rupayhurts the U.S. giant in a key market.
In public Visa has downplayed concerns about the rise of Rupay, which has been supported by public lobbying from Prime Minister Narendra Modi that has included likening the use of local cards to national service.
But U.S. government memos show Visa raised concerns about a “level playing field” in India during an August 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly.
But U.S. government memos show Visa raised concerns about a “level playing field” in India during an August 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly, posing a challenge to Visa and MasterCard in the fast-growing payments market.
Rupay accounted for 63% of India’s 952 million debit and credit cards as of November 2020, according to the most recent regulatory data on the company, up from just 15% in 2017.Publicly,
Kelly said in May that for years there was “a lot of concern” that the likes of Rupay could be “potentially problematic” for Visa, but he stressed that his company remained India’s market leader.”That’s going to be something we’re going to continually deal with and have dealt with for years. So there’s nothing new there,” he told an industry event.

‘Not So Subtle Pressure’

Visa told the .U.S . Government it was concerned india’s “Push to use transit cards linked to rupay” And “The not so subtle pressure on banks to issue” Rupay cards,
Finance minister Mrs Nirmala Sitharaman said last year that “Rupay is the only card” Banks should promote. The government has also promoted a rupay-based card for public transportation payments.
Modi, in a 2018 speech, portrayed the use of rupay as patriotic, saying that since “Everyone cannot go to the border to protect the country, we can use rupay card to serve the nation.”
When Visa raised its concerns during the USTR gathering on august 9, it cited the Indian leader’s “Speech where he basically called on India to use rupay as a show of service to the country,” According to an email U.S. Officials exchanged on the meeting’s readout.

Challenges For Rupay

Low Share In The Credit Card Market

While RuPay has a large share of the debit market, it lags in the credit card space. As per sources, currently, RuPay only has a 20 percent share of India’s credit card market which is led by Visa, followed by MasterCard.
While RuPay’s adoption is slowly picking pace in credit too, Visa and MasterCard are expected to remain the preferred choice for banks as credit cards are a key revenue earner for banks.
“International networks can provide fancier deals and better customer experience. Banks cannot trade that and risk losing customers as their credit card related charges are crucial for them,” the source said.
As the first-time customer market evolves, customers too are expected to move to international networks in a bid to meet aspirations and for better experiences with global payments.

Outcomes

MasterCard faces an indefinite ban on issuing new cards in India after the central bank said it was not complying with the 2018 rules. A USTR official privately called the MasterCard ban “draconian”
While RuPay dominates the number of cards in India, most transactions still go through Visa and MasterCard as most RuPay cards were simply issued by banks.
Under the Pradhan Mantri Jan Dhan Yojana (PMJDY) which was flagged off back in 2014, the government issues only RuPay debit cards to new account holders. This is the biggest leg-up for RuPay in terms of lending a fair share of the debit card market to the NPCI card.
RuPay plans to grow its credit card business and is also working on growing its contactless payments offerings which allow to make payments through smart phones and watches. Experts also believe that RuPay could be successful in transitioning its existing customers into using their premium products over time.
With its ambitions to grow in areas where it currently is lagging, will RuPay be a big threat to Visa and MasterCard even in the credit space?
“India’s credit market is highly underpenetrated. It is expected to grow by 3x in the next few years and that means all players can get a fair share of the market based on their offerings. It is an open and competitive market.”