Companies & Sectors
Hastings & Clive are back — but this time around, they are waving MasterCard & Visa

The payment processing industry as it stands today is steadily eating into India’s economic growth by deciding what we do with our money and with whom

How would we as an independent nation, about to celebrate our 63rd Independence Day, react in the following hypothetical situations:

The Indian PM has to travel to Cuba, in the course of his international visits, and Boeing / Lockheed Martin take objection to the fact that he is planning to go there on a Boeing 747 aircraft. They then withdraw the operating licences for the global operation of the aircraft, suspend maintenance and arbitrarily also ask all other Boeing/Lockheed Martin support companies en route to not provide any form of service or assistance. The Indian representatives in India are suddenly not available for comment.

Information on MasterCard or Visa or American Express cards used by unidentified terrorists at ATMs and POS terminals in and around Gujarat which may or may not have been connected with the 26/11 Mumbai attacks is not provided to the government of India on grounds of "privacy", regardless of the simple fact that the jury is still out on whether the Indian Constitution really does offer privacy as a fundamental right. Further queries on the matter are simply ignored or worse, existing data on them is sought to be covered up, even though traces on Internet communications are found. The representatives in India are suddenly not available for comment.

Analysis of typical spend patterns of key people in India is undertaken by a variety of agencies abroad on a regular basis, and is done as permitted under US laws, without reference to or permissions being sought from the impacted people. Any objections are met by directing people to the miles of fine print in such agreements as may have been signed by these people in good faith, since they presumed they were covered by Indian regulations and laws, and in any case contacting the India branch offices of the relevant companies does not provide anything more than stonewalling. The representatives in India are suddenly not available for comment.

Thanks to an over-dependence on US government controlled GPS systems and navigational charts issued by the Royal Admiralty, some islands in the Indian Ocean have simply disappeared off the charts. Not due to rise in ocean levels or global warming, but by a simple click of a mouse. Furthermore, navigation by sea and air is banned in these areas for reasons not very well specified, including for emergencies. These territories fall in India's sphere of influence, and are impacted by a variety of treaties and conventions, none of which seem to bother those who would take the traditional and legal freedom of the seas and turn it upside down.

The list can go on. But this column is more about the way the payment processing industry as it stands today is steadily eating into India's economic growth, by trying to control the very root of the ideals that the champion of free trade stands for, by deciding what we do with our money and with whom. And yes, the representatives as well as those controlling things in India are suddenly not available for comment. Likewise, both RBI and SBI also do not respond, despite email messages and reminders.


The Payment and Settlement Systems Act of India, 2007, is, as far as we as sovereign and free Indians are concerned, the governing statute under which the plastic in our pocket performs. We like to think of these wonderful tools of our fiduciary existence as being extensions of other Indian government documents - after all, what can be more sacred to a country's independence than its own currency and economy? By definition, therefore, this plastic is an extension of everything we hold holy, sacred and vital, as well as everything our founding fathers fought for when we sought freedom from the multiple yokes of foreign rulers - including and of increasing importance in the recent years - our economic freedom.
 
You can read up about it here:
 
http://www.rbi.org.in/scripts/FAQView.aspx?Id=73
 
This Act makes things very clear for anybody wishing to set up a payment system in India and they have to do so only after getting permissions from the Reserve Bank of India (RBI) under the above Act (Section 4 & 5). It also lays down the provisions in case of calling for returns or information (Section 12 & 13). The standards are laid down by the RBI (Section 10). Directions are issued by the RBI (Sections 17 & 18) and obviously have to be in the national interest. The list goes on - and nowhere does this Act even imply that an applicant or system provider will adhere to anything but the laws of India when as a successful applicant he does business.
 
Then why does an SBI credit card not function in Iran lately? Because, it appears, that despite all the RBI instructions and the PPS Act of 2007, they are suddenly following US laws on sanctions against Iran.
 
Not content with trying to establish a monopoly on the Point of Sale (POS) business in India, their collaborators or partners in the business, Visa and MasterCard, ably supported by American Express, are now telling our banks what to do and with whom, abroad also. That's wonderful, isn't it?
 
This is also one of the reasons why electronic money or plastic money options have not really reached out to the masses, since entry barriers thanks to this sort of "co-operation" are still very strong and expensive, thereby leaving out the large number of small regional co-operative banks and other local institutions which would assist in seeing that many of the unbanked also reduced the current high transactional costs of operating under a localised and an-all cash or barter economy.

Thankfully, the ATM business moved into the control of the National Financial Switch, and we have immense growth in the country on this business and at much lower costs to customers than those provided a few years ago by the same MasterCard/Visa combo. Although here also, why India's banking regulators needed a foreign company called Euronet to do all the end management when there are enough resources in India who would do the same even better has never been suitably explained, though indications are that domestic collaborations or subsidiaries like the Institute for Development & Research in Banking Technology (IDRBT) or along the lines of CRIS are in the wings, waiting to take over.
 
Meanwhile, China's payment processing industry has moved rapidly to fill the space left behind in Iran and other countries, by this monopolising behaviour from Visa and MasterCard. What is India doing?
 
We await an answer from the RBI, and shall have more on the subject.

User

COMMENTS

P C Haldar

7 years ago

Excellent and timely article.

K B Patil

7 years ago

I have been reading Mr. Malik's articles on a wide variety of subjects. They are real eye openers to me. However, I have mixed feelings about an Indian rival to Master Card and Visa. My grounds for worry are mainly on account of poor corporate governance. I would be happy to see RBI taking steps to ease funds transfer procedures, particularly in non urban areas.

REPLY

V Malik

In Reply to K B Patil 7 years ago

Thank you for reading the article.

Corporate governance of quite a few Indian entities is far better than their foreign counterparts, as example:-

Amul - Nestle.
Indian Railways
Delhi Metro
The ATM business in India

This too shall prove itself. Fear of the unknown should not prevent us from forging ahead.

Humbly submitted/vm

Shadi Katyal

7 years ago

When oh when will we ever get out of East India Company syndrome or this a
way to keep all the developments on hold.
We are now part of Global economy but our thinking still is clogged with the past colonial. and thus heading Clive and Hastings?
It is evident that 5000 articles of misinformation during KGB rule of India have deeper effect on the writer thinkable than evaluating the true nature of today business.
First we must look deep into our own
envelopment of poverty and see why with this kind of thinking we are falling and not moving ahead.
Maybe the writer should read the report in today NY times about hunger and starvation and deaths while food in thousands of tons rotting in the storage. Maybe he should travel in Haryana and Punjab and see how that food is stored in open fields and how much rats flourish on it.Maybe he should read how money lender and politicians has exploited the poor.
Sorry for diversion but fact is that if we wish to utilize US made aircraft's and have signed certain memos of acceptance than we can keep quite and not try to prove anything.
Similarly about Credit card privacy, it is similar to Swiss account and India has failed to deal as we become arrogant and threat and thus get back nothing.
Same is true of any credit card utilization and fees and since most of the world believes in Laws and thus continue to accept such rules,.why this question?
Is India in any power situtation like China that it can dictate or change.
At least for me the article is nothing but typical anti west , more or less a
communist propoganda


REPLY

V Malik

In Reply to Shadi Katyal 7 years ago

Dear Shadi Katyal, thank you for reading and writing in, yes, this correspondent is aware of ground level realities not just in India but also worldwide, thank you. Everytng changes, and we need our place in the sun too, so here's to India Pay - and i remember reading comments similar to yours when Indian Railways chose to go on its own with computerisation, also similar ones when India's automobile industry started flexing its muscles.

This, too, shall pass. We are increasingly a Nation, and not a Market.

rgds/vm

shadi katyal

In Reply to V Malik 7 years ago

Dear Mr. Malik, The comments about Indian Railways has nothing to do with your writing about Clive and Hastings. That was mostly from people who thought they might loose their jobs.Sam,e is true of all kinds of oppostiton to any new development. we saw what is happening to many projects in name of environment etc. Do you recall Narbada andolan and loss of Crores of rupees. We are a nation which feel must object to every project aand thus we have groups who with help of NGO op[pose.
We cannot demand our place in sun by keeping our mindset with past history.To get that place in SUN one needs to start thinking fresh ideas and not be locked in East India Syndrome which has left us in the dust of development of China and even Thailand and Singapore etc.
In reality if you read the history, East India company did not come to rule but trade and it was us who invited them to get involved and finally enslave us.
We hae to think of futured and not past

pravin

7 years ago

much ado about nothing mr malik.the clives and hastings of today are not mastercard or visa which provide valuable service to indian citizens.it is the RBI which keeps the rupee devalued -thereby enslaving crores of poor indians.
The nebulous "national interest" canard makes no rational sense.spooks and babus in delhi dont define india and its laws.ofcourse,their unmitigated power to meddle in commerce is the threat to be reckoned with

REPLY

V Malik

In Reply to pravin 7 years ago

Dear Pravin, thank you for reading this article and writing in. Appreciate your point of view as well as the liberty to disagree with it.

Peace.

vm

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