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NPCI Launches RuPay Debit Cards; Challenges

The National Payments Corporation of India (NPCI) has launched its much awaited payment network, RuPay, which will compete with international payment product facilitators, MasterCard and Visa, reports The Hindu Businessline. Four public sector banks, State Bank of India, Bank of Baroda, Bank of India, and Union Bank of India, launched debit cards based on the platform. Bank of India’s inclusion in this list is probably old, though – it had launched Aadhar enabled debit bards on the RuPay payment network, in July 2011. Other banks that have signed MoUs with NPCI for launching the RuPay platform include Punjab National Bank, Canara Bank, ICICI Bank, HDFC Bank, Citibank and HSBC.

Around 200,000 cards have been issued by RuPay and its targeting 10 million debit cards in the network by March 2013, according to a report by Livemint, that quotes NPCI MD & CEO, AP Hota. A tie-up with Discover, US based card issuer and payments company, also allows RuPay cardholders to utilize the Discover, Diners Club International and PULSE networks for international purchases and cash access outside of India. However, users will not be able to use RuPay based Debit Cards online until September.

Challenges & Opportunity

– Incumbents: It’s likely to be difficult for RuPay to replace the incumbents, who have a worldwide presence, through ATMs, physical points of sale, and internet payment gateways.
– Online Transactions: Although, the platform is expected to be available for online transactions by September, it will take time to integrate with all payment gateways. For the same reason, bank customers will also be skeptical of it, since RuPay’s acceptance will not be universal, at least initially, compared to Visa and MasterCard, which have much greater penetration. Interestingly, in an interview with the Economic Times, Visa’s Country Manager, Uttam Nayak, had dismissed RuPay, saying that Visa was not afraid of competition.
– Lower costs: As Hota points out, the Rupay network is likely to allow banks to lower costs (by 40% he claims), and allow payment of fees in the Indian currency, as opposed to Visa and MasterCard, which take fees in foreign currency.

Is A Card Based Approach The Right One? (Nikhil adds)

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Credit Card penetration in India is abysmally low, and some banks have even reported a decline in their credit card base over the last few years. Debit Card penetration is much higher, but card based transactions are limited. We wonder if, given that the NPCI has also launched the Interbank Mobile Payment Service, which allows customers to make mobile payments to both other users and merchants (although the merchant rollout is still in a pilot phase), whether the NPCI should only have an IMPS based system, instead of going with cards.

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