According to Global Payment Cards Data, 80% of cards across the world are issued between Unionpay, Visa and Mastercard. There are about 14 Billion cards used in the world with Asia Pacific showing the fastest growth – thanks to various financial inclusion programmes across China and India.
As Unionpay looks to expand its footprint outside of China, Visa and Mastercard have been trying to fight it out in India. Visa already has a 40% market share in India, where the Reserve Bank expects card transactions to hit $1 Trillion by 2025. But the market is getting tougher for Visa and they are losing market share to UPI (Unified Payments Interface) and Rupay.
UPI and Rupay are the products of the NPCI (National Payments Corporation of India) that operates with a mission of “To touch every Indian with one of other payments services”. The UPI was launched in April 2016 by Dr.Raghuram Rajan the then Governor of the Reserve Bank of India.
Rupay is the new card payment scheme launched by the NPCI, and has been conceived to fulfill RBI’s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments. Rupay currently has 15% of the card market and has been one of the most inter-operable payments solutions, thanks to various schemes by NPCI.
Rupay has seen tremendous growth across the country due to SME and rural friendly pricing. There were about 700 Million transactions on Rupay last year with an aggregate of close to Rs. 700 Billion in transaction size. Rupay also has a partnership with PayTM who issue Rupay cards to its customers.
This has brought Visa under a lot of pressure and last week they made a major announcement that they were slashing their service fees on all credit and debit card transactions by 95%.
Visa has revised its data processing fees to encourage everyday digital payment usage across consumer and merchant categories – VISA INDIA
Debit card transactions in India account for 96% of the volumes, and 49% of transaction value. This is primarily due to rural customers and small businesses using debit cards for day to day transactions. This is a sub Rs.2000 market, and Visa are targeting that audience by making these transactions more affordable across the value chain.
In doing so, they are taking Rupay head-on. The general trend in India is that as a private service provider competes with a public sector service or a government backed service, the private firm typically wins the battle – due to quality of service offered.
I doubt if it would be quite that simple in the case of payments in India. NPCI have their reach in every single part of the payments landscape, and to beat their service offering is going to take quite a lot of efforts. The Rupay -Visa battle has just begun, and this should be an interesting space to watch.
Arunkumar Krishnakumar is a Fintech thought leader and an investor.
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