RuPay, an Indian payment gateway akin to Visa and MasterCard, is likely to be ready for rollout within 18 months. National Payments Corporation of India (NPCI), the umbrella organisation overseeing the project, has already started garnering global acceptance for the national card system.
“Our consultant has just started working. It would review the strategy document that we had prepared internally, and is expected to take six-eight weeks. Much would depend on the timeline that it suggests and discuss with us and we will freeze that. But we would like it to happen as quickly as possible...it should not take more than 18 months for at least the debit and prepaid (cards) to come up,” NPCI Managing Director and Chief Executive Officer AP Hota told Business Standard.
Creating a domestic payment gateway was spurred by the Reserve Bank of India’s (RBI), underlining the need for such a system. This , RBI said, was due to “the high cost borne by Indian banks for affiliation with international card associations, in the absence of a domestic price setter”.
Affiliation with international card associations resulted “in the need for routing even domestic transactions, which account for more than 90 per cent of the total, through a switch located outside the country,” RBI had said in its Vision Document on Payment and Settlement Systems.
China already has a payment gateway system in place, a benchmark against which RuPay may well be compared, although taking into account India’s banking environment, a different model would have to be adopted, said Hota. China UnionPay, a payment gateway for Chinese banks, was introduced in 2002 and is accepted in over 100 countries worldwide. However, in spite of its impressive growth, it experienced friction with global payment majors, notably Visa.
With international acceptance of the card being a vital factor, NPCI too, is planning to work with global card associations. “We have expressed our intention of building international acceptance of the RuPay card. Obviously, for international acceptance, we need partners who can make it happen. The card associations can do this and it would be quicker this way. We can also talk to different large acquiring companies, but that would be a slow process. We are evaluating which is the right way. Aligning ourselves or working with international card associations would definitely be a simpler route,” Hota said.
However, this may be easier said than done. After being scathed by China UnionPay, global payment firms may be wary of the Indian gateway. “International associations would definitely be on the guard, when dealing with the RuPay. In the long run, I feel there would have to be collaboration across associations. But in the short run, it would be a market-share grab,” said Nirmal Palaparthi, chief architect of Fractal Analytics.
On the domestic front, NPCI claimed it had all the required tools at its disposal. “If the card is to be accepted only in the country, we don’t need anything, since we have a block of 500 IINs (issuer identification numbers). We can populate the IINs in over 550,000 POS (points of sale) terminals and can get going,” said Hota. “The real issue is how would this card be accepted abroad. Aspirations in the country are so high that if we give a purely domestic card, people might not accept it,” he said.
The final decision would, however, be taken by the banks. “The banks would choose. If they feel there is a customer segment which would not use the global card, or the likelihood of using it is limited, they might issue a card which is domestic. It would also be cost-effective, since the assessment fee of an international card would definitely be higher than a domestic card,” he said.
“The biggest benefit for banks is this would be cost-effective. Instead of many types of service charges, we would make it very simple. We would also make the dispute management more simple and straight-forward. Banks would have a bigger role in the governance of the (RuPay) scheme --- much more than what they have in international schemes,” Hota said.