India card Rupay to replace Visa, MasterCard

Rupay, the unique India Card which is set to replace global real-time payment processing firms like Visa and MasterCard, is expected to be launched in a few months once the systems and network are in place

Mumbai: After almost two years of planning, the National Payments Corporation of India (NPCI) has at last finalised the proposed unique India Card which once commercially launched would be an domestic alternative to the global real-time payment processing firms like Visa and MasterCard, reports PTI.

"We have finalised name of the proposed card as 'Rupay' at our board meeting here on Monday. We have also finalised the logo for the same," a senior official of the Reserve Bank of India (RBI)-set up NPCI, told PTI last evening.

The official sought not to be named.

The official further said the leading financial consultancy firm Ernst & Young (E&Y) will develop and roll out the entire architecture, including the design and software for the Rupay card rollout.

A senior E&Y official confirmed the development to this agency. He further said, the NPCI will initially launch a domestic ATM/debit cards to begin with and then would hit the credit card market later on.

In 2009, the RBI had asked the Indian Banks Association (IBA) to launch a not-for-profit company and design a rival card, then tentatively called India Card, that meets the requirements of the domestic banks.

And finally, RBI plan is materialising and Rupay will be like the Union Pay of China, which is the domestic real-time payment processing firm for Chinese banks, and was planned to be launched last year.

The commercial launch is expected in a few months, once the systems and network are in place.

Domestic banks now have no option but to tie up with Visa or MasterCard for connectivity between cardholders, merchants and issuing banks not just within the country, but across the globe in the absence of a domestic card.

Every transaction done here using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard, which are based outside the country. But now the Rupay would eliminate the need for this connectivity.

Domestic banks paid around Rs500 crore last year as fees to these global card firms for processing debit and credit card payments, 90% of which were domestic deals.

The Rupay initiative entails the setting up of a network switch, which acts as a payment gateway that connects all the ATMs and points-of-sale (PoS) terminals. The domestic system is meant to gradually replace payment settlement providers like MasterCard and Visa, which now control all payments and settlements that happen through cards.

NPCI is registered as a company with nine public sector, private sector and foreign banks owning stakes. RBI will oversee its operations in the initial years. Thereafter it will function as an independent company regulated by RBI, according to the RBI policy paper on Payment systems vision 2009-12.

"The concept of a domestic payment card (India Card then and now Rupay) and a PoS switch network for issuance and acceptance of payment cards would be looked into. The need for such a system arises from two major considerations (a) the high cost borne by the domestic banks for affiliation with international card associations in the absence of a domestic price setter (b) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country," the RBI had said in its vision paper.

As per the latest RBI data, debit card transactions rose 49% to Rs3,712.67 crore in January 2011, against Rs2,491 crore y-o-y. The number of debit cards in use also rose by 25% in the reporting month to 21.82 crore up from 17.41 crore as on 31 January 2010.

In the April-January period, the total transactions carried out by debit cards jumped by 47.06%, to Rs32,029.24 crore, from Rs21,779.83 crore in the first 10 months of the last fiscal, according to RBI data.

Against this, credit card transactions rose 28% in January to Rs6,934.65 crore, despite a 10% drop in the number of credit cards in circulation. As of 31 January 2011, there were 1.81 crore active credit cards in the country, down from 2.02 crore y-o-y.

During the April-January period of the current fiscal, the total transactions carried out via credit cards increased 21.78% to Rs62,335.44 crore as against Rs51,188.94 crore in the year-ago period.




5 years ago

Very good news, thanks, been a while in coming. It is muchmore than the 500 crore in fees. It is all about our own sovereignity as far as as our payment processing industry and float are concerned, and more.

HOWEVER. Why does the RBI or Indian Government need software and technology from Ernst & Young, do we know who the real owners or backers of Ernst & Young are, for example? To my knolwedge, E&Y Global, the holding company for E&Y, are hidden behind a mask of UK companies routed through various fronts, which then submerge in the usual Channel Islands/BVI kind of opaque cutouts.

RBI should take cognizance of this, and the Indian Government should demand that the real owners and controllers of E&Y come out in the open before placing such serious responsibilities on them.

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