IndiaPay system may take three more years to roll out operations

IndiaPay, the country’s ambitious domestic card payment system—similar to Visa and MasterCard— may take another three years to roll out its operations

Bankers in the country were eagerly waiting for the indigenous card payment system ‘IndiaPay’, that would have reduced transaction charges substantially. However, the IndiaPay card may take another three years to materialise, said a senior official from National Payment Corp of India (NPCI).

“It (the IndiaPay card) will not materialise in the immediate future because we have started our business. As per the plan, our focus at the moment is on ATM switches, then we will launch the cheque-truncation system at Chennai followed by a unique identification (UID) based financial inclusion payments and UA-switching or point-of-sales switching. The IndiaPay card is not (forthcoming) for the next three years,” the NPCI official said.

According to media reports, Nandan Nilekani, chairman of the Unique Identification Authority of India (UIDAI), had said that by February 2011, the Authority will start issuing its UIDs and later that year, when the NPCI is ready, the interbank switch will come into being.

Following the Reserve Bank of India (RBI) proposal to set up an umbrella institution for all the retail payment systems in the country, NPCI was promoted by the Indian Banks Association (IBA). NCPI is building a robust and state-of-the-art national level retail electronic payment system infrastructure in the country.

The idea of a domestic card-payment system is meant to compete with Visa and MasterCard, who have a virtual duopoly in card transactions worldwide and charge Indian banks a hefty fee for associating with them. Domestic card companies, till date, do not have any other option but to affiliate or tie up with foreign card companies, especially the two mentioned above, so as to enable them to spread their services globally.

India is following China in creating its own national payments systems. China’s UnionPay card was introduced in 2002, and gives access to over 85,000 ATM counters of 14 major and minor banks across the world.

In December 2009, NPCI took over the National Financial Switch (NFS) from the Institute for Development and Research in Banking Technology (IDBRT), in a bid to create more resources for it to facilitate retail payments. NFS covers 37 member banks with about 51,518 ATMs. The daily average volume at NFS was around 1.6 million with a peak volume of 2.6 million. In December, it recorded total volumes of 5.4 crore transactions.

NFS, which facilitates routing of ATM transactions through interconnectivity between bank switches, is also the largest network of shared ATMs in the country. NPCI, on the other hand, does only the processing for ATM switching. It still has to enter the post-switch business. But even on this front it is proving beneficial for Indian banks with its lower charges. For ATM switching, NPCI charges just Re1 per transaction while Visa and MasterCard charge about Rs3 to Rs4 per transaction. According to media reports, last year, Indian banks paid close to Rs400 crore to Visa and MasterCard as fees for processing ATM and credit-card transactions.

“Their (Visa and MasterCard) charge structure is different. Theirs is (a) volume-based (model). Higher the volume, lower the price. But ours is (a) flat-based (model),” the NPCI official said.

Consumers in India spend around Rs4,000 on an average every month using credit cards, compared with at least three times as much the amount spent by their counterparts in Asian countries like Singapore and Japan.

Industry sources are very optimistic about the domestic card payment system and its ability; many believe that the transaction process would become much faster.

  • Like this story? Get our top stories by email.



    prashant n

    1 decade ago

    Hm, I personally, if within 5 years the India Pay System goes live in India, it would be a great achievement.

    Yes, the Senior NPCI official felt, for the present, there are other serious concerns to be addressed,for the Retial Payment Industry to take off in our country.

    But a beginning has been made, which is a positive sign

    Shadi Katyal

    1 decade ago

    I recognize that most of my letters sound negative but we have to open our eyes and face the naked truth and stop living in dreamland. India development in last 62 years brings tears in our eyes.
    Here is a good case, we are not even able to copy a good machine, tht is all we do. Where are all those engineers who we claim to be best when they have never done any work with their hands or know what is innovation.
    Why waste money when you can buy cheaper from abroad.
    Train people to be innovative and not just talk of past .

    Navin Jain

    1 decade ago

    Also Aaron, I am not too sure of your data source on Visa/MasterCard costs per transaction. Of course, I dont think thats the only matrix one should look for to judge the value the companies bring to the electronics payments landscape.

    Navin Jain

    1 decade ago

    I believe that the regulator has no business to be in business. if Visa/MasterCard are processing transactions between banks, then there is a duopoly alright, but at least there is competition. with IndiaPay, ala MFS switching, RBI would force banks to route all transactions via NPCI, replacing a duopoly with a monopoly. Being a state owned enterprise, its highly unlikely that it would foster any innovation whatsoever in this field.
    Also, I view with scepticism the comment on Indian Bank saving a lot of money by switching to NPCI as I expect their revenues to come down dramatically due to active intervention of RBI, who is far too intrusive in the business aspects than any regulator should. I also expect MoneyLife to reflect balanced views on topics where the authors do not have much understanding of the business dynamics. Statements like Indian banks would save a lot of money by not having to pay Visa/MasterCard for a business model created by these companies does not make sense, These companies are respected the world over and compete effectively with each other, ala Coke-Pepsi in the market share stakes.

    sriram natarajan

    1 decade ago

    it's important for Indiapay to materialize ASAP to propel electronic payments in India to the next level. Mobile payments and other new payment technologies can only come riding on indigenous low cost payment highways.

    BSE Brokers Forum launches its website

    The website has a useful section where members can share details of defaulter clients who might disturb the market equilibrium

    Market participants would now need to think twice before they default as a new website launched by the BSE Brokers Forum has a section where members can share information about defaulting clients.

    The BSE Brokers Forum (incorporated in 1993) launched its website ( yesterday at the BSE Convention Hall, Mumbai. The website was launched by JN Gupta, executive director, Securities and Exchange Board of India.

    The website has powerful features for assisting the trading members of the stock exchanges in their day to carry out daily activities—like a compliance calendar where compliances deadlines would be readily available to members.

    Those looking for a job in the financial markets have a reason to cheer as the website also has an employer’s corner wherein job-seekers can find vacancies.
    The striking feature of the website is the section dealing with client defaults.
    Here, members can share between themselves details of defaulter clients. Due to the transparency created by the information shared in this process, it is expected that activities of rouge elements who try to disturb the market equilibrium by ‘broker hopping’—defaulting at one member and trading at another—would be curtailed.

    Any important documents and new rules by either the NSE or BSE can be downloaded from the ‘downloads’ section.

  • Like this story? Get our top stories by email.


    Watch the Support at 16,600

    US President’s comments weighed heavily on Indian and Asian markets

    The Indian market continued its downtrend following weak global cues after US President Barack Obama proposed limiting risk-taking at US banks. The market however recovered from the day’s low (16,608) on the back of Reliance Industries’ (RIL) better-than-expected December quarter result and the comment by Kaushik Basu, chief economic adviser to the finance ministry, that the economy will return to a 9% growth rate by the next fiscal year.

    At the end of the day, the Sensex declined 191 points from the previous day’s close to 16,860 while the Nifty closed at 5,036, down 58 points. India VIX, which measures the market’s expectation of volatility over the next 30 calendar days, surged for the second day in a row by 5.74% to 24.85. India VIX is a volatility index based on the S&P CNX Nifty index option prices.

    At 12:00 hrs IST, the Sensex was trading at 16,905, down 145 points from the previous day’s close, and the Nifty was trading at 5,047, down 46 points.
    At 15:00 hrs IST, the Sensex was trading at 16,861, down 189 points, while the Nifty was down 56 points at 5,038.

    Index heavyweight RIL ended flat after the company announced its December 2009 quarter results. Net profit rose 14% to Rs4,008 crore and sales were up 80% at Rs56,856 crore. Analysts had estimated Rs3,954.60 crore net profit and Rs48,785 crore sales.

    Idea Cellular shot up 8% after reporting better-than-expected third-quarter numbers. The telecom service provider saw a 25% growth in revenue and a 12% rise in profit after tax over the same period last year.

    Hindustan Copper surged 10% on reports that the mines ministry has approved selling a 10% stake in the copper miner.

    Dynamatic Technologies signed an exclusive agreement with Reuben Power Plc to establish a national electric vehicle (EV) charging infrastructure network in the UK. The stock shot up 9%.

    As per reports, the December 2009 results of 469 companies showed an average gain of 42.20% in net profit on a 20.30% increase in sales over the December 2008 quarter.

    During the day, Pronab Sen, chief statistician, said that India’s October-December 2009 quarter economic growth is expected to be lower than the previous quarter, due to a contraction in farm output. He also said that the Indian economy, which grew at 7.9% in the September 2009 quarter, is expected to grow 6%-6.5% in the December 2009 quarter.

    During the day, Asia’s key benchmark indices in China, Hong Kong, South Korea, Japan, Singapore and Taiwan were down by between 0.65%-2.56% on concerns of China’s economic growth leading to policy tightening.

    According to research firm EPFR Global, investors have pulled $348 million from China equity funds in the week ended 20 January 2010, the biggest outflow in 18 weeks. Asia ex-Japan equity funds took in only $29 million because of the China-related outflows though global emerging market equity funds attracted $748 million in fresh money in the week to 20th January.

    In the US markets on Thursday 21 January 2010, the Dow Jones Industrial Average slipped 213 points while the S&P 500 and the Nasdaq Composite were down 22 points and 26 points, respectively. The US markets slumped after Barack Obama proposed that banks be prohibited from running proprietary trading operations or investing in hedge funds and private equity funds. The move, intended to limit the risk of another financial crisis, comes as banks around the world are recovering from $1.7 trillion in losses and write-downs since the start of 2007.

    The Indian market is expected to open lower on Monday 25 January 2010 on the back of weak European and US markets on Friday. However the Sensex will have support at 16,600. If this support is breached, we may see a severe sell-off.

  • Like this story? Get our top stories by email.


    We are listening!

    Solve the equation and enter in the Captcha field.

    To continue

    Sign Up or Sign In


    To continue

    Sign Up or Sign In



    online financial advisory
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone