RuPay: India's answer to Visa and Mastercard

The National Payment Corporation of India (NPCI) has charted out a three year growth plan to expand base of its newly launched first-ever indigenous payment gateway - Rupay. This in turn, is likely to give a good run for money to the multinational biggies like Visa or MasterCard. It now plans to use its just-launched debit cards for online transactions.

"RuPay market share is currently not so significant. However, our growth plan will make it a major rival force to other two existing players in next three-five years," A P Hota, Chief Executive Officer told.

We have crossed initial two levels of growth for RuPay. In September, we will add internet acceptability to our existing RuPay debit card. We have already closed a deal with a US based IT-solution provider. Later in March 2013, we will issue RuPay-enabled international debit cards. Finally, we will launch RuPay credit cards in March, 2015," said Hota.

NPCI, promoted by 10 banks under the aegis of Indian Banks Association (IBA) had introduced RuPay enabled ATM cards in June, 2011. Two lakh ATM cards are already in the market. On March 26, 2012 it launched debit cards, which can be used in ATMs and different point of sales (PoS). So far, four banks including Union Bank of India, Bank of India, State Bank of India and Axis Bank have joined the network of RuPay debit cards. This means, a customer of any of those banks can use such debit cards.

NPCI, according to Hota, is in talks with ICICI Bank and HDFC Bank , the lenders with majority of PoS terminals. Together these two entitites own more than half of India's 6 lakh total PoS terminals. At present, RuPay is accepted in 2.10 lakh PoS terminals enabled by Axis Bank and SBI . Such terminals are kept in different merchant outlets wherein you can swipe your debit or credit card.

"Both ICICI Bank and HDFC Bank are in the process of rebuilding the system. They have indicated joining the network in July. So, RuPay card's acceptance in all 6 lakh terminals is a time-taking affair," Hota said.

So, what lure banks to RuPay?

Answer: It is cost effective.

Banks have to pay less to the payment gateway provider. For example, banks have to pay nearly Rs 2 for a customer's transaction size of Rs 1,600 in RuPay network while the same is around Rs 2.80 with Visa or MasterCard.

Secondly, there is no entry fee for banks to enter RuPay network while lenders would have to pay around Rs 25 lakh each in case of other two providers.

Finally, banks need not pay a minimum quarterly fee in the RuPay network. However, the same fee would be in the range of Rs 10-30  lakh for other two major gateways. 

Moreover, RuPay helps in financial inclusion as many co-operative banks and regional rural banks (RRBs) are included in its network.

"RuPay has just issued the debit card. They will have to build the customer base on this. We are looking at all options to join any payment network. Once the Rupay's commercial operation get fully functional, we will be able to compare the cost structure of different gateways," said a retail head of a large private sector bank, who does not wish to be named.