RuPay: Will it Disrupt the Domination of Visa and Mastercard in the Mainstream Digital Payments Ecosystem?
Case Code: ECON099
Case Length: 11 Pages
Pub Date: 2022
Teaching Note: Available
Organization : National Payments Corporation of India (NPCI)
Industry : Financial Services
Countries : India
Themes: Government & Economy, Banks and Banking,Digital Strategy,Government Policies
Abstract Case Intro 1 Case Intro 2 Excerpts
The case describes the inception and growth of RuPay, India’s first and only indigenously-developed card payment system that was launched by the National Payments Corporation of India (NPCI) in March 2012 as an alternative to the MasterCard and Visa card schemes. The case touches upon the early days of the payments market in India with the introduction of the Diners Card in 1961 followed by the introduction of ATM cards post liberalization in the 1990s. It focuses on the need felt for an alternative domestic card payment system to counter the duopoly of MasterCard and Visa in this sector. The establishment of the NPCI under the Payment and Settlement Systems Act 2007 laid the foundation for the rapid growth of the payments sector in India.
The case then highlights the journey of RuPay launched by the NPCI in March 2012 as a low-cost Alternative to Visa and MasterCar which acted as a vital tool in financial inclusion. RuPay was the foundation of the payment ecosystem and helped develop several innovative and effective solutions like UPI and Aadhaar Pay that had the potential to transform the way Indians transacted. NPCI came up with variants of the card that were launched for the masses and affluent customers in India and offered various benefits and privileges. This was followed by the launch of RuPay Contactless in 2017.
In 2018, NPCI launched PMJDY 2.0 with enhanced features and benefits. The government tried to push the usage of the cards by offering debit cards across all public and private banks and by 2019, it garnered over a 50% share in the country’s debit-card market by volume, beating Visa and MasterCard and breaking their hold on the payments market in India. The case then describes the efforts made to popularize RuPay in foreign markets beginning with its foray into the Middle-East. At the same time, the case touches upon the challenges facing Visa and MasterCard following a government nudge in 2019 that approved a US$170 million plan to promote RuPay debit cards and low-value digital transactions to boost their use among marginalized populations. Amid these developments, it remained to be seen whether RuPay can become the market leader in the payment industry in India given that its penetration in the mainstream business is still negligible as most of the cards have been issued as part of financial inclusion to the marginalized population where the transaction size is very low. Also, NPCI needs to consider the fact that the growth of transactions due to mobile banking could pose a threat to the plastic card market by itself in the long-term.
The case is structured to achieve the following teaching objectives:
- To gain awareness of the payment systems of India.
- To examine the approach taken by the government to introduce RuPay and break the duopoly of Visa and MasterCard.
- To explore the need and benefits of financial inclusion and low-cost financial products suitable for rural banking.
- To understand the challenges faced when launching a financial product and ensuring that it becomes successful and facilitates a digital economy.
Payments Market in India
The Challenge for Visa and Mastercard
Government Policy; Economic Development; Rural Banking; Retail Banking; Low-cost Financing; Innovations in banking; Regulatory Framework; Financial Inclusion; Financial Products; Digital Transactions; Rural Economy; Mobile Banking; Cards & Payments
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