Tag: upi

PhonePe launches UPI-based AutoPay functionality for mutual fund SIP investments

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Homegrown digital payments platform PhonePe on Monday announced the launch of UPI based AutoPay functionality for its mutual fund investment offerings.

The functionality will allow PhonePe customers to set up their mutual fund SIPs in a few steps.

With UPI Autopay, customers can set up their SIPs in three steps – selecting the fund, input of monthly SIP investment amount, and authentication with a UPI PIN.

Also read:PhonePe and Flipkart partner to digitise cash-on-delivery payments

“It furthers PhonePe’s vision to continually enhance the end-to-end customer experience while catering to their needs in building the investment portfolio of their choice,” the company said in an official release.

The SIP through UPI AutoPay option is available for all existing and new investors on the PhonePe app.

In order to set up UPI AutoPay for Investments on PhonePe, users can click on the ‘Start a SIP’ icon in the investment section on the PhonePe app homepage.

From there, they can choose their investment style (from conservative/moderate/aggressive) and duration of investment (short/medium/long term).

Also read:PhonePe launches a new wallet auto top-up feature

Users can select a fund, enter the monthly investment amount and then enter their UPI pin to set up regular investments.

Customers can also access the UPI Autopay feature when they opt for monthly SIPs through any of the mutual fund investment options available on PhonePe, it said. The platform has over 307 million registered users.

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All about RuPay, India’s payments network, BFSI News, ET BFSI

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-By Ishan Shah & Tarika Sethia

What is RuPay?

The National Payments Corporation of India’s (NPCI) brainchild, RuPay is a native card payments network initiated by the Reserve Bank of India (RBI). It is a financial services and payment services system launched in 2012 and dedicated to the country in 2014. A fusion between ‘rupee’ and ‘payment’ inspired its name along with the intent to bring India into the global payments market via its indigenous card facility.

Why was RuPay launched?

The proposition of a cashless India was enhanced with the introduction of the RuPay cards. Building a cashless economy requires financial inclusion and RuPay reached rural India and boosted digital payments with the Pradhan Mantri Jan Dhan Yojana scheme. Under PMJDY, 258 million RuPay debit cards were issued in 2020 alone from public sector banks under the Indian government’s financial plan. From 15% in 2017 to over 60% in 2020, RuPay’s Indian market share has accelerated.

Moreover, with no domestic payments network, banks were forced to pay high affiliation charges to multinationals like Mastercard and Visa for trusted associations. Hence, NPCI was created as a non-profit payments company to construct an affordable and accessible payments network for Indians.

Where are RuPay cards accepted?

They are accepted at all ATMs, by POS machines in India, and for domestic online and offline shopping. They aren’t accepted internationally except at those ATMs, POS machines and e-commerce websites where ‘Discover Financial Service’ (DFS) and ‘Diner’ is enabled. Presently, cards under RuPay Global are accepted at over 42.4 million POS locations and over 1.90 million ATM locations in over 185 countries.

Why a RuPay card?

Being a domestic framework, banks issuing RuPay cards are at an advantage as they are not required to pay network registration fees unlike in the case of a Visa or MasterCard registration. With a zero merchant discount rate (MDR), banks have also agreed to charge nothing on UPI and RuPay card transactions. This has made RuPay transactions preferable while also stimulating FinTechs to innovate and provide better payment products to customers because of the ease of UPI and RuPay payments framework.

All about RuPay, India's payments network

It also has a greater reach in rural areas. Under the PMJDY scheme, free RuPay debit cards were given to all bank account holders. As all processing of transactions happens in the country, there is also a lower settlement cost.

RuPay has both debit and credit cards for individuals, corporates, and prepaid cards; there’s a ‘Kisan Credit Card’ available as well. There’s also a ‘contactless’ card that facilitates transactions on a single tap, making payments without disclosing crucial card details.

What does RuPay’s future look like?

With a recent ban on new issuances by MasterCard, RuPay has an opportunistic freeway to capture the credit and debit card market in India. As of November 2020, around 603.6 million RuPay cards have been issued by nearly 1,158 banks.

All about RuPay, India's payments network

Banks are also pushing towards a higher RuPay card issuance after FM Nirmala Sitharaman said, “RuPay card will have to be the only card you promote. Whoever needs a card, RuPay will be the only card you would promote and I would not think it is necessary today in India when RuPay is becoming global, for Indians to be given any other card first than RuPay itself,” at the 73rd annual general meeting of the Indian Banks’ Association (IBA) last year.

Even in the credit space, Visa and MasterCard have made themselves comfortable at the top with huge amounts of credit card transactions happening via POS machines. RuPay can conquer the card space.



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As Covid wave ebbs, UPI transactions hit record in July, BFSI News, ET BFSI

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UPI continues to record growth despite lockdown restrictions aided by the pandemic.

Unified payment interface (UPI) transactions rose to record 3.24 billion transactions in July, up 15 per cent over June, while value-wise the transactions were up 10.7 per cent at Rs 6.06 lakh crore.

The performance

The platform saw 2.8 billion transactions worth Rs 5.47 lakh crore in June, up 10.6 per cent in volume terms and 11.56 per cent in value terms over May.

UPI transactions fell in volume as well as in value for the second consecutive month in May as lockdowns restricted economic activity.

About 2.53 billion transactions worth Rs 4.9 lakh were recorded in May, a 4.16% drop in volume and 0.6% fall in value compared with April, according to National Payments Corp of India data.

Digital payment index

Digital payments recorded a growth of 30.19 per cent during the year ended March 2021, reflecting the adoption and deepening of cashless transactions in the country, RBI data showed.

As per the newly constituted Digital Payments Index (RBI-DPI), the index rose to 270.59 at the end of March 2021, up from 207.84 a year ago.

“The RBI-DPI index has demonstrated significant growth in the index representing the rapid adoption and deepening of digital payments across the country in recent years,” the RBI said.

The Reserve Bank had earlier announced the construction of a composite Reserve Bank of India – Digital Payments Index (RBI-DPI) with March 2018 as a base to capture the extent of digitisation of payments across the country.

The RBI-DPI comprises five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods.

These parameters are — Payment Enablers (weight 25 per cent); Payment Infrastructure – Demand-side factors (10 per cent); Payment Infrastructure – Supply-side factors (15 per cent); Payment Performance (45 per cent); and Consumer Centricity (5 per cent).

UPI on the fast track

UPI transaction volumes surged 43.2% in the first quarter of the last fiscal, 98.5% in the second quarter 104.6% in the third and 112.5% in the fourth quarter.

While IMPS volumes degrew 9.6% in Q1, they rose 26% om Q2. 40.5% in the third quarter and 42.9% in the fourth quarter.

National Automated Clearing House (NACH) volumes grew 32.8 in the first quarter, 13 in second, 0.9 in third while they degrew 10.2 in the fourth.

BBPS volumes grew 66% in Q1, 103.2 in Q2, 84.4 in Q3 and 102.7 in Q4 while National Electronic Toll Collection, the NHAI’s Fastag system logged 83.9 growth in Q1, 249.2 in Q2, 195 in Q3 and 75.3 in the fourth quarter.

On the other hand, RTGS volumes degrew 26.2 in Q1, logged 3.1 in Q2, 10.2 in third and 31.1 in the fourth quarter.

NEFT volumes degrew 3.9% in the first quarter, grew 9.8 in second, 23.2 in third, 17.8 in the fourth quarter.



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Introduction and evolution of Neo-banks in India, BFSI News, ET BFSI

Banking & Finance

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The rise of e-commerce led to trusting digital-first options in various segments such as payments, insurance, investments. It was inevitable that this transition would be witnessed by the banking sector as well. Millennial audiences unfamiliar with brick-and-mortar services are open to digital-first banks where the need to visit a branch diminishes.

Globally, India has the 2nd largest base of internet subscribers, smartphones, and social media user base. With ~600mn digitally active customers, India offers a large market for digital banking services. This growth has been enabled by India’s public digital infrastructure and other regulations and policies.

Additionally, the COVID-19 pandemic has also accelerated the transformation of banking. It created an opportunity to innovate, and almost all traditional banks supplemented their brick-and-mortar branches with sophisticated digital versions of their services. Banks expanded their digital footprint and are using their digital channels to offer a range of services.

Taking this a step further, we now have neo-banks, which are fully operational digital-only banks with advanced features. The state of the art technology is what gave rise to neo-banks in the last few years with startups like Jupiter, Fi, and Finin, launching their services in 2019-20. Revolut, which was last valued at $33B, has recently announced its plan to roll out neo-banking services in India.

What is making Neo-banking the winner?

In the US, neo-banks like Chime allowed consumers to transfer money faster than the usual 3-4 days taken by conventional banks. On the other hand, in the UK, in addition to money transfer, neo-banks also provided borderless banking across Europe, which is a borderless economy. However, such problems do not exist in India, and the winning reasons will be different.

India is different. With an experiential layer added on top of traditional banking, neo-banking will help solve access to several financial products that are not readily available to the 600M Indians and the 65M MSMEs. Riding on the success of the India FinTech stack – Digi locker, Aadhar, UPI 2.0, Account aggregator model, neo-banks will be able to improve digital distribution channels and onboarding for customers. Through the account aggregator model, neo-banks will be able to have access to the financial health of consumers, thus being able to offer personalized financial products. It will also allow them to correctly measure the default risk of these consumers, reducing NPAs and improving ROE margins.

The global scenario for neo-banks is quite different from that in India. In India, digital banking licenses are yet to be issued. Hence the current framework does not allow them to launch full-stack banking services. Obtaining a universal banking license will allow neo-banks to operate as a bank, in addition to the tech angle for better customer experience and ability to offer a myriad of products.

Today, some banks including Kotak Mahindra Bank, Yes Bank, and Federal Bank, are willing to partner with neo-banks for offering underlying banking accounts. It is a lucrative proposition for banks since they share RoE without bearing the additional cost to acquire these customers.

Way forward for neo-banks in India?

Since Indian neo-banks are just being launched, it will be interesting to see how they will monetise as the traditional sources of revenue for a bank would be unavailable to them, i.e., taking deposits and lending those deposits. Other revenue streams like MDR fees on card transactions is decreasing with the acceleration of UPI payments (and UPI payments are not revenue-generating). This leaves the neo-banks with cross-selling of financial products (wealth management, insurance, community-led discounts, stock market investments, etc.) and account opening commissions from banks as the primary source of income.

Currently, Neo-banking in India is at a nascent stage where some positive developments have happened in the last few quarters. The business models around neo-banks in India will have to evolve beyond the MDR on card transactions in the next few years. The key to their success will depend on how innovative they will be, in creating new revenue streams and acquire users with high lifetime value. Neo-banks who eventually will acquire a large user base with sustainable revenue streams will stand a chance to get a digital or a universal bank license and they are the ones who will emerge as winners in this space.

The blog has been authored by Kiran Vasireddy, Partner at Kalaari Capital.

DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.



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UPI sets new record in July

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Unified Payments Interface continued to gain in popularity in July and crossed the 300 crore mark in terms of volume and Rs 6 lakh crore in transaction value.

Data released by the National Payments Corporation of India revealed that UPI processed 324 crore transactions worth Rs 6.06 lakh crore in July. This reflected the opening up of the economy and was a sharp jump since June when it had processed 280 crore transactions worth Rs 5.47 lakh crore.

On a daily basis, UPI has been processing 9 to 10 crore transactions recently. As per NPCI’s transaction count for July 29, UPI processed 10.44 crore transactions worth Rs 19,154 crore.

Launched in 2016, UPI processed 100 crore transactions for the first time in October 2019. While the lockdowns due to the Covid-19 pandemic had impacted digital payments and transactions but UPI has been gaining popularity due to its wide acceptance, ease of use as well as norms of social distancing.

NPCI data revealed that other modes of digital payments also continued to gain traction.

Immediate Payments Service (IMPS) clocked 34.97 crore transactions amounting to Rs 3.09 lakh crore in July. This was the first time that IMPS has also breached the Rs 3 lakh crore mark. It had processed 30.37 crore transactions worth Rs 2.84 lakh crore in June.

Aadhar Enabled Payment System (AePS) transactions also rose to 8.88 crore in volume terms and Rs 23,447.11 crore in value in July. It had processed 8.75 crore transactions amounting to Rs 24,667.08 crore in June.

As many as 19.23 crore transactions worth Rs 2,976.39 crore were processed on NETC FASTag in July as compared to 15.78 crore transactions totaling Rs 2,576.28 crore in June.

Reflecting the rapid adoption and deepening of digital payments across the country in recent years, the Reserve Bank of India- Digital Payments Index for March 2021 rose to 270.59 as against 207.84 for March 2020.

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India Stack to accelerate growth in digital financial services, BFSI News, ET BFSI

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India’s digital finance has the capabilities to transform the emerging economy and has built a state-of-the-art digital financial infrastructure, India Stack, for public welfare. India Stack empowers India’s financial inclusion, open banking initiatives, digital innovation, and digital transformation for businesses and the country.

Built upon an open application programming interface (API), the biometric-enabled Aadhaar system, the India Stack creates a gateway for the digital ecosystem around a uniquely identifiable individual. India Stack aims to create a modern India with a payment system and transition to a cashless economy. It promotes paperless systems with billions of artifacts and a unique digital biometric identity accessible to billions of users, such as Aadhar, eKYC, eSign and DigiLocker.

India Stack consists of three layers of open APIs: identity, payments, and data-sharing.

Potential to transform the financial services

Indian financial services have moved to digital payments through the UPI infrastructure for a less-cash economy. Financial processes such as loan approvals have become fast and paperless through adoption of eKYC and digital signatures.

This infrastructure is available to industry participants, with a few restrictions to ensure financial stability and regulatory monitoring. The objective is to make financial services easily accessible for customers and digitally competent. It enables the innovation at scale.

It digitizes instantaneous payments and collections and empowers users to have control over data. It enables the real-time transfer of government subsidies and support into citizens’ Aadhaar-linked bank accounts.

Moreover, it makes delivering financial services easy and cost-efficient for enterprises of all sizes. India Stack reimagines an ecosystem where service providers can seamlessly offer their services with confidence to customers whose identities are well established. It can be a fintech-enabled credit marketplace, for example, where say a loan service provider enables the end-to-end digitization of cash flow-based lending for small businesses.

Encourage digitization of business processes

This digital evolution or evolution of fintech aims to establish a digital-first economy. It pushes business leaders to deploy emerging technologies to ease up the gap between customers and financial companies. The financial services industry has successfully developed layered platforms that can deliver these functionalities to various stakeholders.

Moving forward, Forrester’s Ashutosh Sharma, VP and research director, further elaborates the five key lessons for the business planning to leverage India Stack.

Design for scale and plan for contingencies. On one hand India-stack enables businesses to pursue a high-volume low-margin business model, on the other Aadhaar-based eKYC has been a subject of litigation in the past causing uncertainties. Altering processes as per India’s Supreme Court orders is costly and time-consuming. Hence, it is advisable, for example, to use a combination of the Aadhaar-based eKYC process and a contingent process.
Ensure digitization of business processes to the extent possible. Business leaders can digitize the maximum of their business processes using India Stack. Digital business leaders must seek the best practices around the India stack and ensure that they are able to use India Stack’s capabilities as per industry standards.

In India, data-sharing extends to more classes of data than in Europe and the UK. This data is outside the sharing perimeter but can nonetheless inform financial decisions such as credit assessments, giving an edge to tech giants.
Obtaining relevant data in the context of opening banking and digitally streamlined lending there are trust issues associated with the data available from account aggregators. The lack of data sanitization and validation will limit potential innovation and the ability to make informed credit decisions.

Firms must not rely solely on India Stack for business outcomes, the model in self is still evolving and has gaps. There are limitations with Aadhaar or eSignature due to the lack of a legal mandate for businesses and users.

To elaborate more upon the topics like above and the evolution of digital banking in India, Forrester is hosting its annual “India Financial Services Webcast Week 2021” scheduled for August 10-13 at 2:00-3:00pm IST daily. The webcast will focus on how Financial Services firm can leverage emerging technologies, adopt an adaptive tech architecture, and retire their technical debt and become future fit in the process.

Join us in this webcast series and hear from Forrester’s analysts as they share their latest research on how financial services firms can become future fit.

Register here: https://forr.com/3hR0nfo

Explore latest research findings and best practice guidance on how banks can make the most of their technology investments in an environment of unprecedented uncertainty and change.



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NPCI begins pilot for voice-based payments, BFSI News, ET BFSI

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The National Payments Corporation of India (NPCI), which has developed key digital payments railroads such as the Unified Payments Interface, Fastag and Aadhaar Enabled Payment System (AePS), is now testing a voice-based payments service for feature phone users in low connectivity zones, sources aware of the matter told ET.

The service is likely to be rolled out on top of the interoperable UPI protocol. The key differentiator would be that the feature phone users won’t need a third-party app or stable internet connection to complete their transactions.

The ‘Interactive Voice Response’ (IVR) payments project is currently in beta-testing mode with the Reserve Bank of India closely monitoring the pilot as per provisions laid under the central bank’s Regulatory Sandbox (RS), the sources said. A larger rollout would be subject to approvals from RBI after the culmination of the first phase of testing.

The solution has been created by Bengaluru-based fintech Ubona Technologies with a private sector bank currently enabling transactions on the backend, sources added. ET couldn’t independently verify the name of this lender.

Both NPCI and RBI are learnt to be testing various feature phone-based payment solutions that cut the need to have an internet connection or an expensive authentication device like biometric scanner or point of sale (PoS) device, a source said.

NPCI didn’t respond to ET’s mailed queries. A spokesperson from Ubona couldn’t be immediately contacted.

As envisaged by the NPCI the service will allow users of feature phones to make merchant payments as well as peer-to-peer (p2p) transactions by simply generating an authentication PIN linked to their bank account and debit card as well as the registered mobile number.

This is similar to how UPI PINs are generated. However, instead of a smartphone through third party internet apps, feature phone users will be able to generate authentication PIN through a common dial-in service which may be operated by NPCI.

The PIN can be then used at merchant points enabled for such transactions wherein the account holder can use their feature phones to select the payment size and merchant details through a Dual Tone Multi Frequency (DTMF) system which will likely guide the user through the two-factor authentication (2FA) flow in local languages.

DTMF is a technology used with touch tone phones to allow callers to use keypads that correspond to the number of the menu option and select preferred options.

The other leg of this system involves acquirer banks enabling their merchants with a proxy identity number that can be used to authenticate the acceptance part of the transaction. The existing interoperable standards between banks on UPI network allow two or more banks to communicate and vet small-ticket payments in real time.

“There are several legs of this payment system which need to be solved for mass adoption, such as strengthening security and access, as well as enabling banks with concurrent calling infrastructure that can handle thousands of calls at a time,” said a source cited above. “However, these considerations are for the future when NPCI and RBI allows a larger rollout of this service. The initial results are promising,” the person added.

“Another pressing concern is that millions of cards have expired under RBI’s chip-and-pin rules. For such a service, these cards would not be valid anymore,” the source added.

As part of NPCI’s pilot, several leading payment acquirers have been shown demos of this service for feedback, the sources added.

ET had exclusively reported in December 2020 that RBI was testing offline payments through feature phones in a handful of villages in coastal Karnataka in partnership with global card network Visa, private lender Yes Bank and digital wallet venture Yuva Pay.

There are at least four other such experiments in the work as well under RBI’s first RS cohort, all largely focusing on developing an offline payments network for feature phone users to make payments without an internet connection.

As defined by RBI, an RS refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain relaxations for the limited purpose of the testing. RBI had introduced this concept in 2019 with live experimentations starting in 2020.



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NPCI in talks to take UPI, RuPay to global markets, BFSI News, ET BFSI

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National Payment Corporation of India (NPCI) is in talks with several global agencies to expand the global footprint of indigenous payment networks RuPay and UPI (unified payment interface), possibly in West Asia, the United States, and Europe.

“We are aiming to expand RuPay and UPI acceptance across world destinations, where Indians travel for holidays, study or profession or even stay,” said Ritesh Shukla, chief executive of NPCI International Payments (NIPL), a wholly-owned subsidiary of NPCI for international business. “We are in talks with global agencies through which we are looking to introduce RuPay and UPI to the world.”

Those international agencies may include regulatory authorities, large banks, fintech companies, or even umbrella payment organisations from respective countries.

Some of the likely destinations include Gulf countries like Saudi Arabia, the UAE and Bahrain, European and North American countries, Mauritius and Singapore, payment industry insiders said.

Shukla did not disclose names of agencies NIPL is in talks with, but a senior payment industry executive told ET, “US-based Zelle or The Clearing House could well be partners.”

Zelle Network is a payment platform in the US that deals with banks and credit unions while The Clearing House Payments Company operates core payments system infrastructure in the US.

Zelle Network and The Clearing House did not reply to ET’s queries as of press time Sunday.

The development comes at a time when global payment giant MasterCard is facing regulatory roadblocks in India.

The Reserve Bank of India had last week banned MasterCard from issuing new cards for non-compliance with data storage localisation rules. The development will likely prompt some banks using its services to reach out to RuPay, industry experts said.

RuPay already holds more than 60 per cent market share in terms of number of cards in India, outpacing both MasterCard and Visa which had till recently dominated the turf.

Launched in 2016, UPI reported a 285 per cent compounded annual growth rate (CAGR) in payment volume since 2017 to hit $457 billion in 2020.

To take UPI payment system to global markets, NIPL would be reaching out to tie up with existing QR (quick response) code infrastructure operators.

RuPay acceptance can be made available through point of sale (PoS) terminals and ATMs.

Bhutan recently became the first country to adopt UPI standards for its QR code. It is also the second country after Singapore to have Bhim-UPI acceptance at merchant locations, NIPL had said last week.

Both UPI and RuPay are payment services delivered through NPCI’s multi-rail payment network.



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Digital payments are the new normal: UPI-based payment apps, digital wallets now eye smaller towns

Personal Finance

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With consumers increasingly opting for digital transactions over cash ones, and with the simultaneous growth in e-commerce and internet penetration in India, digital payments are expected to continue on an upward trajectory.

UPI-based digital payment apps, which were on a growth trajectory even before the pandemic, are thriving in the new normal. A joint report by research firms Worldpay and FIS says 39.7% of India’s e-commerce payments were done through digital wallets in 2020 and wallets have now become the leading online payment method in the country. With consumers increasingly opting for digital transactions over cash ones, and with the simultaneous growth in e-commerce and internet penetration in India, digital payments are expected to continue on an upward trajectory.

The transition of small businesses to online media has also led to this growth. As per data by EY, UPI-based digital transactions have increased by 110% in volume and 109% in value, from June, 2020 till June, 2021. For most payment instruments, including UPI, debit and cards, and those at point-of-sales, the ticket size had come down during the first wave.

Nilesh Naker, partner – fintech, EY, says over the past few months, however, there has been a significant rise in ticket sizes. Spends through UPI have seen a rise of 29% in the average ticket size of transactions during the pandemic, year-on-year, from June 2020 till June 2021. “It shows that people are now comfortable using digital payments and willing to transact with higher amounts,” he notes.

Mahendra Nerurkar, CEO, Amazon Pay, shares that the company launched the ‘Amazon Pay Later’ feature in April, 2020. “Since then, we have recorded two million customers using the feature on the platform with around 10 million transactions clocked till June, 2021,” he says.
Similarly, PhonePe saw 50% month-on-month growth of new customers on its app from April, 2020 till June, 2021. Karthik Raghupathy, VP, strategy and business development, PhonePe, says, “Last year, we improved the ‘Stores’ discovery segment of our app with the addition of a remote payment option, information on merchant store timings, and chat options that connect consumers with their local grocery shops, pharmacies and other essential service providers.”

PhonePe recently launched a cash on delivery (COD) solution this month. Through a QR code, customers can pay for COD digitally through the app at the time of delivery. “This will drive contactless payments for customers who are traditionally more comfortable with cash on delivery,” adds Raghupathy. PhonePe claims that its user base has grown from 200 million in March, 2020 to more than 300 million, currently.

Akshay Mehrotra, co-founder and CEO, EarlySalary and founding member, Fintech Association for Consumer Empowerment (FACE), says, “Digital payments have become significant not only for online platforms but also for in-store shopping.”

Vivek Belgavi, partner and leader, fintech, PwC India, observes that with the lifting of restrictions and the economy opening up, there may be a slight change in consumer behaviour. Digital payments will continue to be relevant though, he says.

With WhatsApp Pay receiving the go-ahead with a user-base cap of 20 million in November 2020, things are likely to get even more of a fillip because of the sheer scale of WhatsApp as a chat platform. Naker says, “We expect a growth trajectory as high as 10-15 times that of the current UPI transaction market over the next three to five years.”

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Mastercard ban gives opportunity to RuPay, digital credit card firms, BFSI News, ET BFSI

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The ban on Mastercard for onboarding new customers by the Reserve Bank of India is set to hit new card issuances in the country, and give an opportunity to other players like Visa and RuPay to raise their market share.

Indian banks may see card spends and new card issuance take a beating after the RBI ban on Mastercard.

Mastercard’s has a one-third share of the Indian card market where Visa is the biggest player. The ban may also impact credit card spends, which are already down due to the Covid pandemic.

Banks have been swift to move on with RBL announcing a partnership with Visa just a day after the ban on Mastercard.

Digital credit card companies that use multiple tech innovations and do not rely on Visa, Mastercard rails are also likely to gain. They use UPI, which is said to have a larger acceptance for both P2P and P2M payments.

RuPay cards

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, according to RBI data.

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.

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 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 value of transactions for debit cards is lower than credit cards. In credit cards, Visa and Mastercard are at the top with the value of total credit card transactions in PoS system being much higher than the value of all debit card transactions. The government has also been pushing banks to focus more on RuPay cards and provide them as the first option to customers.

With this ban, RuPay can target high-value credit card transactions, which are dominated by Visa and Mastercard.

The Mastercard ban

In a major supervisory action, the Reserve Bank on Wednesday indefinitely barred the US-based Mastercard from issuing new credit, debit and prepaid cards with effect from July 22 for its failure to comply with data storage norms.

Mastercard, a major card issuing entity in the country, is the third company to have been barred by RBI from acquiring new customers after American Express Banking Corp and Diners Club International over data storage issue.

In a statement, Mastercard said it is disappointed with the stance taken by RBI.

The RBI, however, clarified that its supervisory action will not impact the services of the existing customers of Mastercard in the country.

Announcing the ban on Mastercard, RBI said, “notwithstanding lapse of considerable time and adequate opportunities being given, the entity has been found to be non-compliant with the directions on Storage of Payment System Data“.

Mastercard is a payment system operator authorised to operate a card network in the country under the Payment and Settlement Systems Act, 2007 (PSS Act).

In terms of RBI’s circular on Storage of Payment System Data on April 6, 2018, all system providers were directed to ensure that within a period of six months the entire data relating to payment systems is stored only in India.



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