Visa Whines about RuPays Success in India

In Visa’s opinion the Indian government is favouring RuPay which is creating a 'hostile' environment in India....really?

The global payment players all have strengths and weakness - Visa and MasterCard are the largest but are far from dominant.

For example Visa is weaker in mainland Europe and known mostly as a debit card, both MasterCard and Visa has made no progress in China and limited progress in India.

Other global payment players include American Express, JCB, Discover/Diners Club, Cetelem and China Union Pay.

The major themes among strong credit card markets are high cash and cheque use -- 72% of global credit card receivables are in only 6 countries - USA, Canada, China, Japan, Korea and UK.

MOBILE PAYMENTS

Coming over the horizon are mobile payment apps/networks like Alipay and WeChat who having had incredible success in China are moving off shore.

Their solutions are trying to be copied by others who now desire the ‘super app’ approach – although currently they are but poor imitations.

These two platforms share 85% of the China mobile market and now threaten the?government?owned China Union Pay.

China's mobile payment market is the world’s largest reaching US$51 Trillion in 2020, from US$81 billion in 2012. AliPay has 1.1 billion active users globally and TenPay is in?partnership?with WeChat -- WeChat has 1.2 billion active global users 45% using payments.

By comparison - Visa had US$11 Trillion in sales in 2020, Mastercard US$6.5 Trillion and with all the others add up to US$23 Trillion in total – and you think the payment world is all settled?

LOCAL PAYMENT ASSOCIATIONS

Local payment associations control 25-50% in many markets – these include domestic credit and debit networks, domestic switches for ATMs or local networks, switches for real time payments, retail store cards, conglomerate consumer cards, single purpose consumer offers e.g. car finance, airline cards, consumer finance offers, instalment loans, buy now pay later as well as budget services.

It needs to be understood that RuPay is not really the first payment processor that is backed by a national government and or local banks

Some examples:

Alpha card is supported by the Russian government and banks

Aurora in Brazil.

BC Card in Korea

Carte Bleue in France

China Union in China

Dankort in Denmark

Eftpos in Australia

Interac in Canada

JCB and JDebt in Japan

Nets in Singapore

Paymark/eftpos in New Zealand

RuPay Success

RuPay has become the largest issuer of debit cards in India by volume and is about to beat either Visa or MasterCard to become the second largest issuer by value. This small scare in just one market caused MasterCard and Visa to whinge and complain to the American government.

They are of the opinion that the Indian government is needlessly favouring RuPay which is creating a hostile environment for the other companies.

At the same time Mastercard face a ban from issuing new cards because of breaches of Indian data laws.

Certain RuPay cards are accepted internationally also like platinum debit/credit card & select credit card through the Diners Club/Discover Financial Network and JCB Network.

Overseas payment brands have had a perceived brand superiority in India and with foreign currency rules in place this is RuPays next objective securing more foreign partnerships with other local networks.

KEY QUESTIONS TO PONDER

Since many countries are making efforts to break the Visa-MasterCard duopoly, there must be something wrong with it?

Is the root cause of the problem is the high fee that these companies charge to process transactions?

Visa and MasterCard typically charge a percentage of the sales amount to the merchant. On the other hand, RuPay charges a nominal flat fee to the merchant.

The payment and technology world is so developed now that it is possible to maintain payment processing networks at bare minimal costs.

Is there a reason for Visa and MasterCard to charge huge fees?

Are they just skimming the market?

Is there a reason why they have whining and complained to the American government?

Are Visa and Mastercard afraid if national payment processors are allowed to flourish, over time frame all merchants will migrate to their networks since it would be extremely cheap?

REAL TIME PAYMENTS THE OTHER THREAT

ACH payments have been something of the quiet backwater of payments – this is changing.

The payments industry has been an early adopter of technology; one key example is ISO 8583, early in 1980s the industry adopted electronic switching, which quickly developed into electronic charge submission to eliminate manual authorizations and expensive paper charges.

?Since 2004 the world has moved too slowly innovate by using instant, low cost, real time ‘digital’ payments based on the global ISO 20022 standard.?

Real Time Payments (RTS) based on the new ISO 20022 is progressively being adopted with 58 countries now using it in some form.

?India, China and Korea are leading the way and this will challenge all other payment types.

INDIAN RTS

Other real time digital platforms run at 30-40% of the cost of association payments while new mobile offering in Asia are 65% cheaper.

?OTHER THREATS

?Not that the business cases are compelling yet

?Other payment threats include –

?1.????Bitcoin – if your happy to wait 10 minutes or more for your transaction to clear

2.????Other Crypto – many options with none yet fully tested as payment options

?3.????Stable Coins - cryptocurrencies that peg their market value to some external reference e.g. US dollar or gold etc

?4.????Central Bank Digital Currencies – digital version of cash operated by a regulator or central bank.

5. Fintechs - can Square, Stripe, Klarna, Shopify become major global payment players - maybe? More likely they are acquired or merge.

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Visa complains to U.S. Government about India backing for local rival RuPay

REUTERS By?Aditya Kalra November 28th

?Summary

·???????India's RuPay dominates number of issued cards

·???????Prime Minister Modi, other officials promote use of RuPay

·???????Visa told U.S. Government Modi's linked RuPay use to national service

Visa Inc?(V.N)?has complained to the U.S. government that India's "informal and formal" promotion of domestic payments rival RuPay hurts the U.S. giant in a key market, memos seen by Reuters show.

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 Aug. 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly.

Mastercard Inc?(MA.N)?has raised similar concerns privately with the USTR. Reuters reported in 2018 that the company had lodged a?protest?with the USTR that Modi was using nationalism to promote the local network.

"Visa remains concerned about India's informal and formal policies that appear to favour the business of National Payments Corporation of India" (NPCI), the non-profit that runs RuPay, "over other domestic and foreign electronic payments companies," said a USTR memo prepared for Tai ahead of the meeting.

Visa, USTR, Modi's office and the NPCI did not respond to requests for comment.

Modi has promoted homegrown RuPay for years, posing a challenge to Visa and Mastercard?(MA.N)?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'

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 Aug. 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.

Finance Minister 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.

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 Modi's financial inclusion programme, industry sources say.

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, the USTR email showed.

Mastercard and Visa count India as a key growth market, but have been jolted by a 2018 central bank directive for them to store payments data "only in India" for "unfettered supervisory access".

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",

RuPay's market share tops 60% in total cards issued, says RBI report

?As of November 2020, around 603.6-million RuPay cards have been issued by nearly 1,158 banks

SBI Card: Analysts see more upside given distribution network, biz model

National Payments Corp to take UPI, Rupay global through new subsidiary

India leads world, processes 41 mn real-time transactions a day

India’s indigenous payment network?RuPay?has cornered a significant market share in the domestic card market since its launch. As of November 30, 2020, RuPay’s market share has increased to more than 60 per cent of total cards issued, from merely 17-per cent market share in 2017, revealed the data released by the?Reserve Bank of India?(RBI) in its booklet on Payment Systems in India (2010-20).

As of November 2020, around 603.6-million?RuPay?cards have been issued by nearly 1,158 banks. But a majority of these are debit cards and only 970,000 are?credit cards.?However, experts have cautioned that this statistic must not be looked at in isolation.

Experts pointed out that one of the reasons behind gaining such market share could be the fact that a significant portion of?RuPay?cards are issued to accounts opened under the Pradhan Mantri Jan-Dhan Yojana (PMJDY). As of January 13, 2021, more than 306-million RuPay cards have been issued to 416.5 million accounts opened under PMJDY.

?“What needs to be checked are the value and volume of transactions,” said experts.

Interestingly, the number of debit cards issued in the country between 2010-11 and 2019-20 increased from 227.8 million to 828.6 million, of which around 300 million were RuPay debit cards issued to basic savings bank deposit (BSBD) account holders.

On the other hand, during the same period, the number of?credit cards?issued also increased from 18 million to 57.7 million. The increase in cards has facilitated growth in both online and physical point-of-sale (PoS) terminal-based card payments, resulting in an increase in digital transactions.

“The drive for a less-cash economy in the wake of demonetisation in 2016 and the issue of RuPay cards for BSBD accounts has increased user acceptance in the interiors of the country where paying with a card was a novelty five years back. RuPay has its popular debit card and its increasingly accepted credit version as well,” the RBI said.

“We need to understand that cards issued is one statistic, but cards active is also an important aspect of it. Essentially, if we look at RuPay debit cards, the merchant discount rate is zero. So there is no revenue for banks or the issuers. Also, the value of transactions for debit cards is lower than?credit cards.?And, in credit cards, Visa and Mastercard are at the top. In fact, the value of total credit card transactions in PoS system is much higher than the value of all debit card transactions at PoS,” said Mihir Gandhi, partner, leader–PwC India.

RuPay, operated by the National Payments Corporation of India, is India’s home-grown card network. It competes against global peers, such as Visa and Mastercard, in the Indian market. The government has also been pushing banks to focus more on RuPay cards and provide it as the first option to customers.

“Visa and Mastercard target a specific customer segment who use the cards frequently and for high-value transactions. RuPay debit cards may not have that customer base. Both these card players smartly segment the customers and issue limited cards to highly affluent and high-value customers, so that a large number of transactions takes place through the cards,” he added.

Mastercard imbroglio may turn into golden opportunity for RuPay

Surabhi??Mumbai | Updated on?July 28, 2021

RuPay is a market leader in terms of overall card issuances but lags behind in credit cards and spends

The recent embargo on Mastercard from onboarding new domestic customers on its card network could prove to be a golden opportunity for domestic card player RuPay, which has till now been lagging in terms of credit card issuances.

A product of National Payments Corporation of India, RuPay was launched in 2012 as the country’s domestic card payment network.

At present, it is the market leader in terms of overall card issuances but lags behind in credit cards and spends.

Data with the Reserve Bank of India reveal that by November 30, 2020 there were 60.36 crore RuPay cards issued and it had a total market share of over 60 per cent of the total cards issued.

But a significant proportion of RuPay cards is in the nature of debit cards with only 9.7 lakh credit cards issued as on November 30, 2020.

Market trends indicate that Visa has the second largest issuance of cards followed by Mastercard though there is no official data.

With most banks bullish on credit card acquisitions, the ban on Mastercard meant they are looking for other tie ups and partnerships.

RuPay and Visa are the only two payment companies that continue to operate without any restrictions on onboarding new customers and capturing not only issuance but also spends is a key focus for most payment players and lenders.

Experts believe that this could prove to be an opportunity for RuPay to expand its market share in credit card issuances.

‘Huge hole’

“The embargo on Mastercard has left a huge hole in the market, especially in the mid-income consumer segment. Mastercard was the fastest growing credit card offering in the country and this could prove to be a golden opportunity for both Visa and RuPay. It is difficult to say which of the two players would have the greater advantage but Visa’s offering may be more sophisticated in terms of marketing. RuPay, however, has come up with great infrastructure,” said Mathew Chacko, Partner, Spice Route Legal.

The issue of zero MDR could prove to be slightly challenging for RuPay, he said.

But in an indication of its wider reach and acceptance, there are 1,158 issuer banks for RuPay cards. The NPCI has also been working on tie ups to ensure that it has a global acceptance, which many banks have seen as a challenge for customers in the higher income categories.

According to a recent Nomura report, credit card issuances increased by 9.1 per cent year on year to 6.23 crore by May 2021 with outstanding spends per card registering a 3.1 per cent growth to ?16,700.

Lenders like YES Bank have indicated that their credit card acquisitions would be impacted by anywhere between 75,000 to 1 lakh over a three month period due to the Mastercard ban.

With most realising the need to have atleast two partnerships in place for card issuances, RuPay could gain quite a bit as it is unclear when the embargo on the other players will be lifted.

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