India approved the rupee on Wednesday. Rs 1,300 crore plans to promote domestic RuPay debit cards and low-value digital transactions to promote their use among marginalized groups. This move may challenge the influence of competitors such as Visa and Mastercard.
A government statement stated that under the plan, the government will pay banks within one year a certain percentage of the value of transactions completed through RuPay debit cards and low-value direct inter-bank transactions, which can be traced back to April 2021.
The plan may further threaten the domestic market share of competitors Visa and Mastercard. Earlier this year, Visa complained to the US government that India’s “informal and formal” promotion of RuPay had hurt it in one of its main growth markets. The plan will include reimbursement of digital transaction processing fees of up to Rs. 2,000 rupees, government officials said.
The government said: “It will also help provide accessible digital payment methods for unbanked and marginalized people”, referring to people outside the formal banking and financial system.
The Indian Payments Commission, an industry body, stated that the industry will “benefit a lot from this move.” As of November 2020, the bank has issued more than 600 million RuPay debit cards.
Deepak Chandnani, head of South Asia and the Middle East at Worldline, a payment and transaction services company, said the move will provide a major boost for RuPay.
“The end-to-end cost of each transaction by the acquiring bank is approximately 15 basis points for the processing and other costs of debit card transactions. This incentive will provide the acquiring bank with much-needed probation and encourage further figures Transaction,” Chandnani said.
RuPay was founded in 2012 by the government-backed non-profit organization National Payment Corporation of India (NPCI), competing with Visa and Mastercard in the fast-growing digital transaction market of Asia’s third largest economy.
Finance Minister Nirmala Sitharaman has publicly asked banks to promote RuPay cards to facilitate digital transactions in the country.
Mastercard and Visa see India as a key growth market, but were shocked by the 2018 Central Bank directive, which required them to store payment data “in India only” in order to achieve “unrestricted regulatory access.”
After discovering that the U.S. payment giant did not fully comply with data localization rules, banks are currently prohibited from issuing MasterCard-branded cards to new customers.
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