The payment processing industry-II

Over 99% of plastic, Internet and electronic money transactions in India by Indians — by value and number —are purely domestic. Then why is this crucial business handled only by foreign companies?

Just for a moment, sit back and imagine an extreme scenario - it is the year 2010, in an alternative independent India, with a very open market philosophy, and low self-esteem. Our EVM (Electronic Voting Machines) are controlled and maintained out of Florida. The price of bus and train tickets is set in Singapore, and the Indian Railway's computerised reservation system is centralised in Toronto. Mobile phone companies are all from Holland, and mobile phone instruments are sold only if they were made in Finland or South Korea. Cars are now imported only from Germany, the UK and Italy. Auctions for tea and shipping freights are undertaken only in London - for domestic as well as international markets. And of course, India's currency is still printed and designed at Threadneedle Street, and fuel prices at filling stations will be set in Houston, Texas. And everything is released in India only after it has run its course abroad, and newer versions or products are released there.
The list can go on. And on a personal level - Indians are not allowed to be Captains and Chief Engineers on Indian flag ships. (Incidentally, this was the case with more than a few Indian flag owners even till as recently as the '70s).
Thankfully, over the past few decades, we grew out of all this dependence and lack of self-confidence as a country. Rare and stupid is the manufacturer who does not do a simultaneous release of anything in India. Regardless of anything said, slowly but steadily, India is reaching a level where everything can be manufactured or done locally.
Except for the payment processing industry. In the course of researching details for this series, your correspondent met up with a variety of people in the payment processing business - all with hardly a kind word for the Reserve Bank of India (RBI) and its rules - but none of them knew what to say when equally tough and strong rules about banking systems abroad were quoted. When asked a direct question on why this could not be done in India, the answer was always the same - oh yes, it can be done tomorrow, but the RBI has to take the lease.
I mean, even letting credit card data out of the US is something that is not permitted, and here we are in India - our complete plastic and electronic money information is transacted out of India. Wonder what the RBI has to say about that?
Now at the risk of being repetitive, but it is important, so, try to rationalise this. If over 99% of plastic, Internet and electronic money transactions in India by Indians, by value and number, are purely domestic, then why is this important business, as well as the information it generates, still permitted to be controlled by Visa, MasterCard and American Express, using three or maybe maximum four payment processing companies operating out of one geographical area of the USA called Georgia?
It would not be unfair to compare this with the way an entity called 'ARAMCO' operates in Saudi Arabia. An organisation so huge and powerful, that the bravest of the brave fear to even write about it, also because so little is known about it. However, being an ex-shippie has some benefits, and one of them is an exposure to the way oil moves all over the world. And an idea of the forces behind it. From landward, most of humanity cannot approach within miles of any oil facility, and those who do work there learn very soon to stay very quiet about realities. But we approach from the sea, and move right into the heart of where the action is, and after some time become very cynical as we go about our lives.
ARAMCO controls the transactions of all the oil in Saudi Arabia. Oil is currency and capital there. In effect, ARAMCO controls the spigot, the tap, and so it controls everything there.
Likewise, here in India, as the New Age progresses, it is our large consuming population which is increasingly currency as well as capital. The money they earn, remit, spend, save and everything else - the transactions go way beyond anything that the whole world's oil economy put together can even conceptualise. At least ARAMCO operates from Saudi soil. Here in India, our payment processing system doesn't have that privilege, and not because it is something that we cannot handle ourselves in India. Not just the hand on the spigot/tap, but the spigot/tap itself is located outside India. And it is not as though the payment processing industry is about rocket science. The standard on complicated monetary transactions across a vast range of platforms and modes is the Indian Railway Passenger Ticketing System. Setting up multiple switches for a domestic payment processing industry would be something they could do in very good order and very short time, as per inputs provided to this writer - and they apparently have been waiting in the wings to do exactly that for over a decade now.

Briefly, this is what the payment processing industry does. Like a many-sided crystal, each one linked to the other, it is beautiful in its simplicity. At its simplest, it operates as a trusted via media between a seller and a buyer, regardless of location or origin of both. At its most complex, it behaves as a multi-role middleman between the merchant and the buyer, again regardless of location or origin of both, but also facilitates the shipment and delivery of goods or services, to some extent intercedes in quality and quantity issues, handles foreign exchange transactions, provides credit and loans, assists in masking the real nature of the transaction, and so on and so forth. At the extreme, it also provides cover for and participates on the basis of money that has no colour or soul, in every dubious activity that humanity can possibly think of - witness the close synergy between them and, for example, the corporate pornography and organised prostitution business.
Since we are not in the morality business, we let that one pass - but let nobody else pass snide remarks on India's black economy being one reason why payment processing cannot be done in India.
As an aside, here is this question: Which two corporates are the world's largest - first and second - and are possibly now merging, in the pornography business?
It is nobody's case that the payment processing industry does not have a role in society, either. Large New Age companies like Cisco and Google were initially funded and started using credit cards, going through the same payment processing industry which approved the credits in the first case. Likewise, in its role as a counter to counterfeit currency, this industry is unbeatable.
The issue here, in its simplicity, is this - when will India run its own payment processing industry (in India) especially for pure domestic transactions?
And what is the delay about?

(This is the second part of a three-part series)

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The payment processing industry-I

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