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Atmanirbhar Drive Comes To Payments With Government’s RuPay Push

Can RuPay take on the might of Visa and Mastercard?

Mock-ups of Rupay Cards are displayed for a photograph at the office of National Payments Corporate of India. (Photographer: Kanishka Sonthalia/Bloomberg)
Mock-ups of Rupay Cards are displayed for a photograph at the office of National Payments Corporate of India. (Photographer: Kanishka Sonthalia/Bloomberg)

The government’s nudge to banks to push RuPay cards comes against the backdrop of slow adoption of the homegrown network and a surge in foreign players across the payments industry.

"Promote RuPay cards. Make sure that the NPCI becomes a brand-India product which can be promoted elsewhere in the globe and NPCI therefore should be a priority,” Finance Minister Nirmala Sitharaman said at a gathering of Indian bankers on Nov. 10.

In the last fiscal, RuPay transactions comprised 20% volume and 11% value of the total card payments in the country. That’s a marginal growth of 2% in transaction volumes and 1% in value over fiscal 2018-19, according to data from the Reserve Bank of India and retail payment statistics available on the National Payments Corporation of India’s website.

“The biggest challenge for RuPay has been that despite reaching the masses, its usage remains much lower compared to the overall card spends, largely due to a high ratio of dormant cards,” said Naveen Surya, who earlier headed digital prepaid card firm ItzCash and is currently chairman emeritus at the Payments Council of India.

As of December last year, the government had issued 59.15 crore RuPay cards, of which just 56% were active in 2020, according to data provided by Sitharaman on Feb. 3, in response to a question asked by Lok Sabha member Pratima Bhowmik.

“Staying true to its Atmanirbhar Bharat (self-reliant India) vision, the government is determined to reduce dependence on foreign payment networks by making RuPay India’s preferred card network,” said Vijay Jasuja, advisor of cards and payments at Punjab National Bank.

Queries emailed to NPCI, Visa, MasterCard and American Express remained unanswered.

Compared to the eight-year old RuPay, foreign payment networks such as MasterCard and Visa have been in the country for nearly four decades. Over the years, they have invested heavily into advertising and loyalty programmes to grow their merchant and customer-base.

In a bid to boost Rupay’s adoption among small and medium businesses, the government waived merchant fees charged by banks and payment system providers on digital transactions using RuPay cards.

But the move backfired as banks continued pushing debit cards from foreign networks, which still generated revenue for them, rather than promote RuPay that gave them no incentive, a paper published by Indian Institute of Technology Bombay in January showed. The study also estimated that the merchant discount rate charges on RuPay debit cards would have amounted to nearly Rs 1,000 crore revenue for the banks, for 2020, had it not been waived.

“This (reluctance of banks to promote RuPay) might have set the stage for government’s recent ask from all banks to push RuPay cards,” said Surya.

On Nov. 11, Sitharaman asked banks to promote only RuPay cards, especially as the card network was becoming global. In August, NPCI had announced setting up of an international subsidiary, NPCI International Payments Ltd., to sell the technology behind its RuPay network in international markets.

Back home, even as the government nudges banks to push RuPay debit cards, the payment network needs to go a long way to catch up with its global peers.

“Being a fairly new payments network, RuPay is on a learning curve with respect to technology,” Ashwini Kumar Tewari, managing director and chief executive at SBI Cards & Payment Services Ltd., said in an emailed response.

“Settlement and chargeback processes need improvement,” he said. “International acceptance is improving, but needs to be bolstered further, to be at par with the competing landscape.”