Ever since cash-less transactions was introduced, the payment gateway eco-system has been dominated by only two companies: Visa and Mastercard. Due to various technical and operational reasons, no other company ever came close to disrupt their dominance, and present an alternate for the users of cards.
However, with the emergence of India’s own RuPay, this dominance is all set to be crushed.
Launched in 2012 and created by National Payments Corporation of India, RuPay was formally inaugurated last year by President Pranab Mukherjee. Conceived as a medium to facilitate ATM withdrawals, online transactions and PoS payments by merchants, RuPay’s increasing adaptation by various banks, financial institutions and traders/merchants have stumped MasterCard and Visa.
Now, a stage has arrived when RuPay may very well tear into the dominance of Visa and MasterCard, and become a formidable, Govt. backed payment gateway for all Indians.
Here we evaluate three reasons, which makes RuPay as a potential disruptor in this niche:
a) RuPay And Jan Dhan
During the Delhi Economics Conclave, PM Modi shared several interesting stats related with RuPay’s massive reach among rural users. As per the recent stats, 36% of all debit cards in India are RuPay enabled, which means that it has already snatched 36% share from Visa and Mastercard, in terms of number of cards.
PM Modi said, “Thanks to Jan-Dhan Yojana and RuPay cards, we also introduced healthy competition in the debit and credit card space,”
As per RBI’s data, there are 603 million debit cards in India, out of which 222 million are RuPay enabled debit cards. And the most interesting aspect: Out of 222 million RuPay cards, 170 million are attached with Jan Dhan accounts, and 52 million are mainstream bank accounts.
RBI deputy governor SS Mundra said, “The domestic card system has gained popularity and with its linkage under the Jan-Dhan Yojana, it has become a household name,”
Considering that more than Rs 26,000 crore has already been deposited under Jan Dhan accounts, the story has just started!
b) Increasing Transactions With RuPay
As per the data from banks and financial institutions, Jan Dhan bank accounts have shown very less transactions, as most of the people who have opened Jan Dhan belong to rural areas and BPL families. Despite this, RuPay has now managed to garner 20% share in transactions, all over the country. As per NPCI, there are 10 million transactions done everyday using debit cards in India, and 2 million of them are coming from RuPay cards.
Yes, 36% share of debit cards but only 20% share in transactions may seem a big gap for RuPay right now; but the way its adaptation and usage is increasing, we are sure that the gap would be bridged very soon.
c) Less Service Charges By RuPay
Besides the penetration and usage, another important aspect is the service charges levied by RuPay, compared with Visa and Mastercard. On one hand Visa and Mastercard charges a variable fee for every eCommerce and Point of Sale transaction, RuPay charges a fixed fee of 90 paisa for every transactions: 60 paisa from the issuing bank, and 30 paisa from the acquiring bank.
Moreover, Visa and Mastercard charges Rs 3 per ATM transaction, meanwhile RuPay only charges 45 paisa.
Additionally, RuPay is also set to roll out their credit cards from next year, which can become a game changer very soon. Tieups with international payment gateways like China UnionPay, Japan-based JCB Co and Discover Financial services is already done, for greater reach and usage. More than 250 banks have tied up with RuPay, and the number is growing every day.
Mastercard and Visa, both must be facing extreme heat from RuPay right now; and their dominance is in danger.