Visa & MasterCard gone.

Rupay card, bring it on

Finally it's here! The much talked about India card which will replace global payment players MasterCard and Visa in India. CNBC-TV18's Gopika Gopakumar finds out more about the Rupay Cards. It may not be long before the logos of Visa and MasterCard disappear from your plastic cards. Instead these will be replaced by an Indian name Rupay. This is the new card payment scheme launched by the National Payment Corporation of India, a company started three years back by 10 banks, to oversee all retail payment systems in India. Currently, all card payments are routed through Visa or Mastercard which process these transactions outside the country, but this may not be the case in the future. "There should be something domestic. Payment information is very sensitive. So there has to be repository of payment information with some institution. Why should banks in India pay such high fee to MasterCard or Visa," AP Hota, CEO, National Payments Corporation of India said. Currently, banks pay around Rs 300 crore every year to Visa and MasterCard for processing all debit and credit card payments. NPCI says Rupay will reduce the cost for both banks and customers. "We believe that it's possible to reduce the processing fee that banks pay to MasteraCard and Visa by half if not more. Rupay will be aiming at reducing the cost for the bank," Hota added. Bankers too feel Rupay will be a viable option. Alok Mishra, CMD, Bank of India , said, It is indigenous and will be cheaper. Most people here don't travel abroad nor do they need settlement for Visa, MasterCard. What they require is a settlement here. And I think Rupay will work for them. Rupay's strategy To begin with it focuses on tying up with 82 regional rural banks and 100 urban cooperative banks. Having issued 10,000 debit cards, it now plans to scale up by issuing Aadharenabled financial inclusion cards. NPCI says it will be a while before the commercial banks start issuing Rupay debit cards as most of them already have tie-ups with global players. Besides, the regulator favours competition in this segment and so unlike the Chinese, may not make it mandatory. There was a time when India was more exciting than China for MasterCard

RuPay, Indias first domestic real-timepayment processing system, to be launched in March 2012
For the RuPay launch, the National Payments Corporation of India is waiting for PoS clearance to kick off the service which is set replace the processing systems of global majors like VISA and MasterCard

After much deliberations and hype over the RuPay card, the unique domestic card in India which is set to replace global real-time paymentprocessing firms like VISA and MasterCard, the service will be commercially launched with full functionality by March 2012 by the NationalPayments Corporation of India (NPCI). AP Hota, chief executive officer and managing director, NPCI, toldMoneylife, Currently RuPay cards are being issued with limited functions, they are usable only in ATMs and micro-ATMs (used by bank business correspondents). Once we get the clearance for PoS (point-of-sale) usage, which is expected to come about in March 2012, the card will be launched with full functionality.

The RuPay initiative entails the setting up of a network switch, which acts as a payment gateway that connects all ATMs and PoS terminals. An NCPI spokesperson said, Once PoS acceptance and e-commerce infrastructure is ready, NPCI will go ahead for final approval for rolling out RuPay cards that would be accepted on all channels.

Since June 2011, RuPay cards have been issued with limited functions, and only used as ATM and micro ATM cards. These cards are not used for other commercial purposes such as usage in departmental stores and shopping centres. Four banks have issued this card. The RuPay cards issued by four banks are widely used in around 85,000 ATMs across the country. Co-operative banks such Gopinath Patil Parsik Janata Sahakari Bank, NKGSB Cooperative Bank and Kashi Gomti Samyut Gramin Bank (which is a regional rural bank or RRB), have issued RuPay for ATM usage, while Bank of India has issued (RuPay) for micro-ATMs for the purpose of the business correspondents of the bank, added Mr Hota.

Currently, domestic banks have no option but to tie up with VISA or MasterCard for connectivity between cardholders, merchants and issuing banks, not just within the country, but across the globe in the absence of a domestic Indian payment processing system.

Every transaction done in India using a debit or credit card issued by a domestic bank is routed through network switches owned by VISA or MasterCard, and both entities are based outside the country. But now RuPay would eliminate the need for this connectivity outside India for domestic transactions. NCPI plans to focus on urban co-operative banks and RRBs. We plan to enter a market mainly consisting of urban co-operatives and RRBs since they dont issue any cards at the moment, and there is no other player in that area, said Mr Hota.

In 2009, the RBI (Reserve Bank of India) had asked the Indian Banks Association (IBA) to launch a not-for-profit company and design a rival cardthen tentatively called India Card, which was to meet the requirements of domestic banks. And finally, the RBIs plan is materialising and RuPay will act like Union Pay of China, which is the domestic realtime payment processing system for Chinese banks.