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Our take: RuPay cards get a push, as switching fees for online and PoS txns are waived


The National Payments Corporation of India (NPCI) has waived off switching fees for all RuPay cards for ecommerce and PoS terminal transactions. This was in effect since November 11 and will extend to December 31, 2016. Of the 755 million debit cards in circulation RuPay cards account for 40%, around 302 million in total. IMPORTANT: this waiver of fees is not applicable to MasterCard and Visa. Note that RuPay’s network charges a flat fee of Rs. 0.9 per transaction on PoS terminals (Rs 0.6 from the issuing bank, and Rs 0.3 from the acquiring bank). Visa and MasterCard charge a variable fee  in proportion to the transaction concerned.

The NPCI added that the switching fee would be refunded to both issuing and acquiring banks before January 31, 2017. An issuing bank is the bank which issues a debit card while an acquiring bank is the bank which accepts the payment from a merchant. It also asked all banks to issue cards for current and savings accounts (CASA) which have no yet been carded to promote digital transactions.

The Jan Dhan advantage, but will it work?

It needs to be pointed out that a majority of RuPay cards are issued under the Jan Dhan Yojana scheme for financial inclusion (the number of RuPay cards from Jan Dhan Accounts stood at 194 million). As such, many of these cards are not being used at all by these account holders (23.7% of 25.5 crore accounts opened under Jan Dhan Yojana have zero balance).

Usage of RuPay cards for online transactions is dismal. According to a JM Financial report, RuPay said that the number of monthly online transactions increased from 0.2 million in April 2015 to 1.4 million in January 2016. The report also estimates that the value of online transactions in January 2016 increased to Rs 78.2 crore. However, the average ticket size of RuPay card at POS terminals is Rs 1,700 compared to Rs 1,329 for all debit cards (including Visa, MasterCard and RuPay).

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MediaNama’s Take: What it means for card holders and merchants

For RuPay card holders, the waiver of switching fee will not result in any benefit particular benefit to them. However, waiver means that the cost of transactions over the RuPay network will reduce for banks. Hence, banks will push the benefits of lowered costs to merchants. This might result with some merchants insisting on RuPay cards rather than MasterCard or Visa cards. 

Note that POS transactions have been failing at many terminals across the country following the demonetization. Manish Patel, CEO of Mswipe, pointed out that Visa’s servers failed with the additional load resulting in POS machines being unable to process many transactions.

RuPay, on the other hand, has been building its capacity for card transactions by moving to a new switching platform. AP Hota, CEO of the NPCI, said this in an earlier interview with MediaNama:

The old switching platform is the Eurnonet platform and the new platform is the FIS platform. The difference in the two lies in the capacity of processing. Now we can process only 40 million transactions a day. So on the whole RuPay’s network does about 25 million transactions. So now we are building capacity for 100 million now.

Perhaps this would result in fewer payment failures on RuPay cards.

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MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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