Why RuPay Card is making payment gateways MasterCard and VISA unhappy

RuPay card of India
RuPay is an Indian domestic card scheme conceived and launched by the National Payments Corporation of India (NPCI) on 26 March 2012. It was created to fulfill the Reserve Bank of India’s (RBI) desire to have a domestic, open (four-party), multilateral system of payments in India.

We are moving towards the cashless transaction and online shopping and we are using a credit card or debit card for this. We don’t care about background process happening when we actually swipe the credit or debit card in point of sale terminal for the payment. There is a lot of processes happens to verify your credit or debit card, checking your balance and updating details to complete the transaction. You must have noticed small logo named MasterCard, VISA or American Express on your card, these are the Payment Network which assists the Acquire Bank to communicate with your Credit Card issuer to complete the transaction.

I would recommend checking my previous article How do Credit Card Companies like MasterCard and VISA make money? to know more about the important parties involved in credit card transaction like Acquire, Issuer or Payment network. I have tried to explain the full business model in simple term and you will be amazed to know, how these Payment Networks like MasterCard and VISA are making money in Billions each year without lending money or issuing the credit card. So check it out, it will you to follow and understand this article.

The need for RuPay Card in India

RuPay is similar to the MasterCard and VISA card and it is designed to facilitate the cashless i.e. credit/debit card transactions. Currently, we have a monopoly of foreign Payment Networks like MasterCard and VISA in credit or debit card and their processing charges are more.

As per the report, In India, 90% of credit card and debit card transactions are domestic; however, the cost of transactions was high due to the dominance of foreign card schemes like Visa and MasterCard.

It makes sense to have some alternative domestic solution to minimize the transaction processing cost and avoid the foreign payment gateway like MasterCard and VISA monopoly. RuPay facilitates electronic payment at all Indian banks and financial institutions. National Payments Corporation of India (NPCI) maintains ties with Discover Financial to enable the card scheme to gain international acceptance.

How the RuPay Card is Different from the MasterCard and VISA?

RuPay Card works similar to MasterCard and VISA to facilitate the cashless transaction but it has some difference:

World Wide Presence:

  • MasterCard and VISA are in business since 2005 and they had the monopoly helping them to grab the worldwide market and making them the strongest Payment Network.
  • RuPay Card can be used in India only for all cashless transaction and cannot be used for International transactions; however, The Prime Minister of India, Narendra Modi, launched the RuPay scheme in Singapore on 31 May 2018. The launch took place in parallel with related services offered by the NPCI, such as UPI and BHIM. The State Bank of India, Singapore will be the first bank to issue RuPay cards in the country.
  • As of 29 December 2018, the Bhutanese Prime Minister Lotay Tshering has promised on his first foreign visit to India to allow RuPay cards for electronic transactions in Bhutan.

Processing Charges:

Processing Charges of MasterCard and VISA are high and on the other side, RuPay provides very less processing charges and also started to offer good offers in domestic shopping.

Why MasterCard and VISA companies are upset with RuPay card?

MasterCard and VISA companies had a monopoly in cashless translation and they are charging more processing charges on each transaction. They don’t issue any card or lend any money to the Card Holder, but still making billions every year. Look at their growth since their establishment in 2005.

MasterCard and VISA card profit growth

Now, they are getting tough competition from RuPay as 90% of the cashless transaction in India happens domestically only and RuPay is better than MasterCard and VISA for a domestic transaction. Surely, people are moving towards RuPay as it is Indian Card and has less transaction processing charges.

About 515 million cards have been issued as of August 2018 by nearly 1100 banks giving it more than 50% share in the country’s debit-card market by volume, beating the much older duo of Visa and MasterCard.

Data from National Payments Corporation of India (NPCI), which manages the RuPay card scheme, shows that RuPay card usage at point-of-sales has jumped 135% to 459 million transactions in the financial year 2018 against 195 million last year. That’s a good number and it is increasing year-by-year. All these factors are enough to give MasterCard and VISA nightmare.

Reasons to own RuPay Card?

  • Is could be the best card for you if you are making a more domestic transaction then the International. Also, the money which is going to these foreign payment gateways will be going to India and helping the country. It has no difference then the global presence, it provides strong security while transaction and personally I like the logo of RuPay then MasterCard and VISA.
  • As of July 2018, RuPay cards have been issued across the length and breadth of the country to savings- and current-account holders of over 1100 banks in India. Apart from the main private- and public-sector banks, RuPay cards are also issued by cooperative banks (scheduled cooperative banks, district cooperative banks, state cooperative banks, urban cooperative banks) and regional rural banks (RRBs) in the country.
  • RuPay cards are accepted at almost all ATMs across India. and are accepted at 97% of all PoS terminals in India.
  • RuPay is presently the largest card network in India with 65% of the market share in India’s payment card market.
  • Certain RuPay cards (such as Platinum Debit/Credit Card & Select Credit Card) are also accepted internationally through the Discover Financial Network and JCB Network.
  • Lastly, to support Indian Initiatives, stopping the monopoly and stopping excess money going to the foreign country.

I hope, you liked the article and as I said please go through my earlier post How do Credit Card Companies like MasterCard and VISA make money?  to know more about the overall process and Credit card business model.

Do share and comment on this post to make it more useful for the other readers. Thank you for reading and God bless you all.

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