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Commentary

Rupay Kicks Off with Debit Cards

image The National Payments Corporation of India (NCPI) has started Rupay, a domestic card payment network. NPCI already is at the back-end of the India wide bank ATM network and runs IMPS, the Interbank Mobile Payment Service (Read of my experience with IMPS). It has the ability to instantly find out, given a debit card, how much money you have in your account.

The first launch is for a debit card, which will be accepted in over 91,000 ATMs and 6 lakh PoS terminals, but in India only. They have tied up with DISCOVER (think Diners Club)  for international acceptance, which should help Indians travelling abroad (or buying off foreign web sites).

The first banks to offer Rupay Debit cards are Bank of India and Union Bank of India. The PoS terminal acceptance though, will include terminals from Axis Bank, Bank of Baroda, Corp bank and SBI. Conspicuous by their absence are the ICICI Bank and HDFC Bank, which have a large PoS Network around the country. (They’ll come on board. They have to.)

Fees will be cut substantially by using Rupay, by about 40% for banks and lower per-transaction fee for merchants.

Credit cards is next, but will only be available in March 2015. That’s three years away.

Will Rupay replace Visa and Mastercard? If transaction fees are lower and fraud instances can be handled well, I think a Rupay network could easily beat the current reach of Visa and Mastercard. While there are substantially more debit cards than credit cards (see chart), the value of transactions made on credit cards is higher. In Jan 2012, the POS transactions (non-ATM) were Rs. 5060 cr. (50.6 billion) on debit cards versus a larger Rs. 8868 cr. (88.68 bn) on credit cards. So we will see MC and Visa continue to serve more than 50% of the transactional space until at least 2015 when Rupay goes into credit cards, and perhaps five years after that until Rupay irons things out. So unless you have a 20 year horizon, you shouldn’t write off Visa and Mastercard in India.

(Why aren’t we doing things faster, NPCI? )

Will Rupay be accepted for online transactions? The press release says, “in due course”. There is currently no online payment gateway that supports it, and you don’t have that two factor authentication (that is, a second password known only to the card holder) for an online transaction that is currently done by the credit card layers at Mastercard and Visa.

(If you own a debit card, why not just do a direct bank transfer through netbanking? Most web sites support most banks anyhow. But debit cards are very popularly used for online transactions, so I presume there’s more to it.)

Is Rupay going to be more efficient? Of course it is. I’ve used IMPS and it takes a fraction of a second to transfer money from one account to another, even inter-bank. Fraud data analysis and redressal is also faster. So yeah, I think they can be way more efficient than Visa or Mastercard for Indian transactions. Plus it’s greater value for lesser cost – with no round trips abroad, there’s a saving on bandwidth (minor) and exchange rates/fees (major).

This is a must-watch. NPCI has been impressive, and I hope Rupay kicks off big time. I just wish it would move faster into credit cards.

  • Praveen says:

    I am getting many offer on my Visa/Mastercard 🙂 I may miss those on RUPAY 🙂

  • DJ says:

    I didn’t quite understand the excitement behind Rupay? IMPS sounds like a standard use of a debit card – you can always know exactly how much you have and pay instantly using any debit card, no? And, Rupay getting into credit cards isn’t going to bring any novelty either, is it?

    • IMPS is mobile. Rupay with credit cards will likely enable it for the ultra small merchant (visa/mc have minimums and transation lower limits etc) plus they will probably cut merchant fees on the credit card level to <1%. That is a substantial change. Rupay for now will be a game changer only if they have great technology and do small payments (like toll booths. Or mobile connected swipe devices for home delivery of food etc. which is usually too small for the likes of Visa/MC to service properly)

  • IsItPossible says:

    Do we have fraud protection on the use of ATM/Debit cards in INDIA yet!!!! if the answer is “NO” then why aren’t anyone talking about it? Banks are forcing people to go for debit cards (that too with a yearly fee!!!!) and no fraud protection in place….!!!
    Is it just me or no one really cares about this!!! or no one really gets this!!!
    can anyone please clarify this if they know how this is handled!!!!

    • I’ve pointed out that even the banking ombudsman hss helped uncover fraud, even taking the,help of cops where necessary, for atm misuse. Atms even have to store camera records by law.
      Currently fraud at pos terminals is not fully addressed and banks do it ad-hoc. stramgely, fraud is not rampant or any more than credit cards, I wonder why!
      Debit cards on the net only go through the visa/mc two factor auth process, I think?

  • IsItPossible says:

    Yes we can:
    1. Contact cops
    2. Contact bank
    3. Take every possible precaution on our end as a customer
    BUT
    Concern about debit cards:
    1. If at all any fraud happens then money is gone from our accounts and no fraud insurance or bank will cover it.
    2. All you will hear is “a complaint is launched and investigation is underway” but your money is gone.
    3. With that said we bear the cost of fraud and without realizing we are also paying a fee for the debit card usage for NO apparent protection against fraud on our own money.
    Better option:
    STOP using debit cards and use credit cards, at least to protect yourself from any fraudulent activity on your bank acctn and if any fruad happens on your credit card you can always deny to pay the charges as they cannot go after your bank acctn.

  • Ayush Jain says:

    Wrt debit card fraud, i think it’s better to own mastercard debit cards. The advantage with these is that if even for POS use, PIN has to be given. So if the cards are lost, chances of losing money is less, compared to Visa debit cards. However, for whatever reasons, Visa is far more popular in debit cards.
    Apart from lost cards, what are the other possible debit card frauds – are you talking about skimming ?
    Deepak,
    What would be the advantage of Rupay for an end-customer ? Will it mean lower or zero transaction charges in stores which insist on adding 2% (like most electronics stores) ?
    Regards,
    Ayush

  • sathish says:

    NCPI has been openly trying to copy China model for payments in India to keep Visa and Master in check.
    One major difference is that V/MC both are already well established here (even with their cost structure).
    Also, now Airtel is trying to push this mobile payments business in a different direction with thier Airtel Money service (which is a stored value service and not as good as IMPS).
    RuPay needs the support of Merchants to increase volumes quickly and for that Banks must be willing to market this instead of their current V/MC services. I hope public sector banks see this as an opportunity to jump into this PoS business.