India on Wednesday Rs. Rs 1,300-crore plan to promote domestic RuPay debit cards and low-value digital transactions to promote their use among marginalized populations, a move that could challenge the clout of rivals such as Visa and Mastercard.
Under the scheme, the government will pay a percentage of the value of transactions done through banks Rupee Debit cards and low-value direct interbank transactions for one year are set to begin in April 2021, a government statement said.
The plan may further threaten rivals’ domestic market share Visa And master card, Earlier this year, Visa complained to the US government that RuPay’s “informal and formal” promotion of India was hurting it in one of its key growth markets.
The scheme will cover reimbursement of processing fee on digital transactions up to Rs. 2,000, government officials said.
It will also help in creating accessible digital modes of payment for the unbanked and marginalized population, the government said, referring to those outside the formal banking and financial system.
The Payments Council of India, an industry body, said the initiative would greatly benefit the sector.
As of November 2020, more than 600 million RuPay debit cards have been issued by banks.
Deepak Chandnani, head of South Asia and Middle East, payments and transaction services company Worldline, said the move would give a significant boost to RuPay.
Chandnani said, “An acquiring bank incurs a cost of about 15 basis points per transaction to process and other costs for debit card transactions. This incentive is a great way for banks to acquire and encourage further digital transactions. Will provide necessary relief.”
Launched in 2012 by the National Payments Corporation of India (NPCI), a government-backed non-profit, RuPay competes with Visa and MasterCard for the rapidly growing market for digital transactions in Asia’s third-largest economy.
Finance Minister Nirmala Sitharaman has publicly asked banks to promote RuPay cards to promote digital transactions in the country.
Mastercard and Visa count India as a key growth market, but have been hit by a 2018 central bank directive that they store payment data “only in India” for “unfiltered supervisory access”.
Banks are currently barred from issuing MasterCard-branded cards to new customers after the US payments giant did not fully comply with data localization rules.
© Thomson Reuters 2021