After news agency Reuters reported that Visa Inc has ‘complained’ to the United States government that the Indian government’s promotion of homegrown card network RuPay is hurting Visa’s prospects, former National Payments Corporation of India (NPCI) chief AP Hota is weighing in on the tussle.
Hota is of the view that the Indian government has provided no additional favours to NPCI’s RuPay and international networks Visa and MasterCard’s grievances stem from RuPay’s inclusion in the Pradhan Mantri Jan Dhan Yojana (PMJDY).
Hota told Moneycontrol, “International card players (like Visa and MasterCard) have been complaining ever since RuPay was made part of PMJDY. Had these international cards players come out with credible and relevant products on financial inclusion, I am sure, they too would have been included.”
The PMJDY scheme was announced by Prime Minister Narendra Modi back in 2014 in a bid to increase access of financial services across the country by helping citizens open bank accounts and other savings instruments. As per the Department of Financial Services under the Ministry of Finance, 31.74 crore RuPay debit cards have been issued under the scheme until now.
Hota argued that beyond its inclusion in PMJDY, RuPay provides certain benefits to banks, free accident insurance up to Rs 1 lakh which set it apart from other card networks.
“RuPay has gained market share in a consistent way on the strength of its product features and far superior service level. Apart from PMJDY, there are no other government favours from the Government. The regulator too is absolutely neutral. There is no harm in political leaders taking pride in the success of a domestic initiative,” Hota added.
According to the report by Reuters, US government memos show that Visa raised concerns about a "level playing field" in India in a meeting held on August 9 between US Trade Representative (USTR) Katherine Tai and Visa Inc executives, including CEO Alfred Kelly.
"Visa remains concerned about India's informal and formal policies that appear to favour the business of NPCI over other domestic and foreign electronic payments companies," said a USTR memo prepared for Tai ahead of the meeting.
Similar concerns were raised by MasterCard Inc in 2018 when, according to a Reuters report, the company had lodged a protest with the USTR.
Hota is of the view that this is a non-issue and Visa and MasterCard have ample opportunity to retain their share in a market as big as India.
“They need not get scared. They should focus on what India needs and review their products wherever necessary instead of complaining about the success of RuPay. Let there be no debate on this non-issue,” he added.
According to the latest data from the Reserve Bank of India (RBI), RuPay’s share in the domestic card market jumped from just 15 percent in 2017 to over 60 percent as of November 2020. Additionally, the RBI ban on new card issuance by MasterCard in India which came into effect on July 22, 2021 has opened up the market for both RuPay and Visa.
In such a scenario, RuPay’s growing adoption is a key concern for Visa Inc in a vital market like India. In its latest annual report, Visa Inc had mentioned that ‘certain governments, including China, India, Indonesia, Russia, Thailand and Vietnam, have taken actions to promote domestic payments systems.’
RuPay, along with the Unified Payments Interface (UPI) also comes under the Zero-MDR norm by the Indian government, i.e. no fees can be levied to merchants for transactions on these networks.On this, the annual report highlighted how governments including India ‘are using regulation to further drive down Merchant Discount Rate (MDR), which could negatively affect the economics of our transactions.’