National Payment Networks take on international giants in the race to dominate the market - A RedGirraffe Perspective

National Payment Systems (NPS) are payment systems that are established and operated by governments for domestic transactions. These systems are designed to facilitate the transfer of funds between individuals and businesses within a country, and they have the potential to displace conventional networks like Visa and Mastercard.

One key advantage of NPS is that they can provide a more secure and efficient payment system for domestic transactions. For example, in countries where NPS are in place, merchants may not have to pay the same high fees to accept payments that they would with conventional networks, which can be beneficial for both merchants and consumers. Additionally, NPS can also provide more control over financial transactions and reduce the risk of fraud.

In recent years, several countries have established NPS, and they have become a tough space for conventional payment networks to navigate. Here are five such examples:

South Korea: In 1986, the South Korean government established the Korea Financial Telecommunications and Clearings Institute (KFTC), a real-time payment system that enables instant money transfer between bank accounts. According to KFTC, it processed over 3 billion transactions in 2019, capturing a significant portion of the domestic market share.

China: The People's Bank of China (PBOC) established the China National Advanced Payment System (CNAPS) in 1991. According to data from the PBOC, CNAPS processed over 7 billion transactions in 2019, capturing a significant portion of the domestic market share.

Russia: In 2014, the Central Bank of Russia established the Financial Messaging System of the Bank of Russia (FMSBR) to facilitate electronic financial transactions within the country. According to the Central Bank of Russia, FMSBR processed over 66 billion transactions in 2022, capturing a significant portion of the domestic market share.

India: In 2016, the Indian government launched the Unified Payments Interface (UPI), which enables instant money transfer between bank accounts. UPI has been a game changer in India's digital payments landscape, and according to the National Payments Corporation of India (NPCI), UPI processed over USD 160 Billion in transaction value in December 2022 alone, capturing a significant portion of the domestic market share.

Brazil: In 2019, Brazil's central bank created the Brazilian Instant Payment (BIP) system, a fast and secure system that enables instant and interbank money transfers. According to the Central Bank of Brazil, PIX - Brazil's instant payment system processed over whooping USD 201 Billion in transaction value in the month of December 2022 alone. As of January 2023 more than 130 million people have signed up on PIX. This is equivalent to more than half of Brazilian population.

Its quite evident from the above pattern that National Payment Systems (NPS) have become a tough space for conventional payment networks to navigate. In countries where NPS are in place, merchants may not have to pay the same high fees to accept payments that they would with conventional networks, which can be beneficial for both merchants and consumers. Additionally, NPS can also provide more control over financial transactions and reduce the risk of fraud. It's clear that the emergence of NPS is a trend that is likely to continue in the future, and conventional payment networks will have to adapt to this new reality.

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RedGirraffe.com, a fintech company, specialises in managing large recurring payments for both businesses and households. Recently, the company has incorporated the sale of carbon credits as a means to promote sustainable practices. Through its "RedGirraffe Perspective," "RedGirraffe Exclusive," and "RedGirraffe Story Series," the company aims to initiate thought-provoking discourse on the subject of climate change & undercurrents of global payments.