India Card Rupay - To Replace Visa, Mastercard

[rajanmehta 4,056]

NPCI Finalises Unique India Card To Replace Visa, Mastercard From Domestic Payment System

Mumbai. March 21, 2011. Agencies. Outlook India.

After almost two years of planning, the National Payments Corporation of India has finally finalised the proposed unique India Card which once commercially launched would replace the global real-time payment processing firms Visa and MasterCard, from the domestic payment system.

"We have finalised name of the proposed card as Rupay at our board meeting here today. We have also finalised the logo for the same," a senior official of the RBI-set up National Payments Corporation of India (NPCI), told PTI this evening. The official sought not to be named.

The official further said the leading financial consultancy firm Ernst & Young (E&Y) will develop and roll out the entire architecture, including the design and software for the Rupay card rollout.

A senior E&Y official confirmed the development to this agency. He further said, the NPCI will initially launch a domestic ATM/debit cards to begin with and then would hit the credit card market later on.

In 2009, the RBI had asked the Indian Banks Association to launch a not-for-profit company and design a rival card, then tentatively called India Card, that meets the requirements of the domestic banks.

And finally, RBI plan is materialising and Rupay will be like the Union Pay of China, which is the domestic real-time payment processing firm for Chinese banks, and was planned to be launched last year.

The commercial launch is expected in a few months, once the systems and network are in place.

Domestic banks now have no option but to tie up with Visa or MasterCard for connectivity between cardholders, merchants and issuing banks not just within the country, but across the globe in the absence of a domestic card.

Every transaction done here using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard, which are based outside the country. But now the Rupay would eliminate the need for this connectivity.

Domestic banks paid around Rs 500 crore last year as fees to these global card firms for processing debit and credit card payments, 90 percent of which were domestic deals.

The Rupay initiative entails the setting up of a network switch, which acts as a payment gateway that connects all the ATMs and points-of-sale terminals. The domestic system is meant to gradually replace payment settlement providers like MasterCard and Visa, which now control all payments and settlements that happen through cards.

NPCI is registered as a company with nine public sector, private sector and foreign banks owning stakes. RBI will oversee its operations in the initial years. Thereafter it will function as an independent company regulated by RBI, according to the RBI policy paper on Payment systems vision 2009-12.

"The concept of a domestic payment card (India Card then and now Rupay) and a PoS switch network for issuance and acceptance of payment cards would be looked into. The need for such a system arises from two major considerations

[a] the high cost borne by the domestic banks for affiliation with international card associations in the absence of a domestic price setter

the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90 percent of the total, through a switch located outside the country," the RBI had said in its vision paper.

As per the latest RBI data, debit card transactions rose 49 percent to Rs 3,712.67 crore in January 2011, against Rs 2,491 crore y-o-y. The number of debit cards in use also rose by 25 percent in the reporting month to 21.82 crore up from 17.41 crore as on January 31, 2010.

In the April-January period, the total transactions carried out by debit cards jumped by 47.06 percent, to Rs 32,029.24 crore, from Rs 21,779.83 crore in the first 10 months of the last fiscal, said the RBI data.

Against this, credit card transactions rose 28 percent in January to Rs 6,934.65 crore, despite a 10 percent drop in the number of credit cards in circulation. As of January 31, 2011, there were 1.81 crore active credit cards in the country, down from 2.02 crore y-o-y.

During the April-January period of the current fiscal, the total transactions carried out via credit cards increased 21.78 percent to Rs 62,335.44 crore as against Rs 51,188.94 crore in the year-ago period.

[raj_raj_in_in 1]

this was long time due... idea was floated by vishwas, ceo of ccavenues way back in 1999.

its great for indian payment industry. lets c when it gets implemented.

[I_C_U 10]

Good Initiative.

Somewhere down the line, some wheels are moving in right directions inspite of too much muddle in many other sectors.

Finalizing big project within 2 years sounds exciting.

Will old cards be replaced or only new cards be issued with Rupay.

[csmart 472]

hope banks dont play spoil sports and also merchants support it.. Mastercard and visa may also offer merchants some kickbacks so that they do not migrate to this.

[digitalnirvana 646]

Good initiative but will not succeed unless the new card is accepted globally. MasterCard and Visa have global presence and Rupay will somewhere down the line need to have a global presence or alternatively have tieup with these companies outside India. Also it will need to have tieup with e commerce payment systems like PayPal.

[commonman 228]

If banks support, at least for online payment at Indian sites, this could be a reality.

Then it would be easy to make this acceptable to merchants.

Also, if the processing charges levied on merchant are lower than Master/Visa, they would adopt it quickly.

[Greatest 55]

The project is presently being made available only for domestic markets (read rural markets)... Not for global use.. So the way this is going, it should be a phenomenal success.. Lets see how soon the guns will shoot in implementation..

[HetalDP 947]

It will succed if there actual transactional cost is lesser then current Visa and MC

[sgiitk 32]

When will we grow out of the Not Invented Here syndrome. We have been doing it for ages. I still remember the 'cheapernet' story. So now you will need two sets - one for Mera Bharat Mahan and one for the rest of the World.

[commonman 228]

When will we grow out of the Not Invented Here syndrome. So now you will need two sets - one for Mera Bharat Mahan and one for the rest of the World.

The basic issue is, there is no point is paying lots of foreign exchange to a US based firm for a payment gateway when all other infrastructure as well as the customers are domestic only. 99% of indian banking population never make even one international transaction in their whole life.

If this becomes operational, the existing limits of 5 limited value free withdrawals per month while using other bank ATMs could well be revised to unlimited withdrawals. Also, with lower transaction charges larger number of merchants would start accepting cards and olnine transactions would become cheaper (while payment through netbanking today costs only Rs.10/txn, payment through credit card in most cases cost 1.8%). We can even see the advent of third party co. providing ATM infrastructure for all banks.

So ultimately, the common man would benefit.

Edited March 23, 2011 by commonman

[digitalnirvana 646]

^

Not sure about the other points so would rather not comment, but on the topic of - the existing limits of 5 limited value free withdrawals per month while using other bank ATMs

I have used banks outside India which offer unlimited free ATM usage even of other banks. These ATMs were mostly in railway stations and guess were meant to facilitate users. There were other ATMs also which did not offer unlimited free usage of other banks and this was specified in the ATM itself. So it is mostly matter of common sense. The goodwill that a bank gets by allowing free use to a harried traveller using another bank's card cannot be measured.

Visa and Mastercard are worldwide and cannot be beaten, so why does not RBI negotiate cheaper transaction charges for domestic transactions for Indian banks? This way everyone wins.

[rajanmehta 4,056]

This initiave is not in isolation. It is part of Reserve Bank of India's Payment Systems in India - Vision 2009-12. A well thought out vision.

Vision Paper here http://rbi.org.in/sc...UrlPage=&ID=573

If we study the whole paper, many of the things envisaged are already operational and has actually improved the way India banks, does financial transactions, efficiency, lower cost, speed. safety.

And RBI is one entity in India respected by the same Western World for ensuring the financial stability of India's banking sector during the meltdown. Now that was invented here and actually potrayed Mera Bharat as Mahan...

US Federal Reserve, Barrack Obama, Other Western Leaders were effusive in it's praise. God knows where we would have been if RBI had copied the So Called Liberal Western Banking Model(American particularly).

Something already invented and spread world over should not mean that it can't be improved and bettered for our own interests.

China does things which is most beneficial for its national interests without bothering for anyone. We praise & envy it, would cite examples of it for India to follow and do things in decisive manner...

When actually such things start happenning here, we would like to equate it with narrow nationalistic jingoism...

But Then Most of us English Educated Indians have Western Liberal Ideas..So To Speak..

[commonman 228]

^^^

To add to that,

Both Dr. Manmohan Singh and Dr. Montec Singh were associated with RBI. And the western world has great regards for both of them. Financial Inclusion is a home grown vision. And there is nothing to be ashamed about it.

Edited March 23, 2011 by commonman

[digitalnirvana 646]

Agree with both the posts but sometimes need to know whom to beat and whom to join.

China has R&D based economy where it is mandatory for MNCs to do technology transfer when doing business, India has approached the open economy as a market while China has approached it as a producer, there are many stark differences in their economic policies, so comparing China with India only on one aspect of national card system would be not fair.

[sgiitk 32]

What will you lose - global acceptability of your cards. I do not think the Forex argument holds that much nowadays.

If I recall correctly at one time France tried a France Only card Carte Bleu (or Blanche). I do not think it survived for long.

Edited March 25, 2011 by sgiitk

[csmart 472]

What will you lose - global acceptability of your cards. I do not think the Forex argument holds that much nowadays.

If I recall correctly at one time France tried a France Only card Carte Bleu (or Blanche). I do not think it survived for long.

it depends how implemented. take an example of Singapore. In order to avoid large currency note printing and handling, Singapore introduced Nets card. Same as debit card accepted by everybody from cabs to malls and its huge success. recently govt tried to increased the transaction fees and it back fired.

Nets website