US majors still dominating cards, payments ecosystem; homegrown companies gain ground

The sanctions-led withdrawal of card payments networks like Visa and Mastercard from Russia throws light on the dominance of US-based companies in the global payments ecosystem.

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In India itself, the top two UPI payment apps — Walmart-owned PhonePe and Google Pay — accounted for 364.43 crore UPI transactions in February, which was over two-thirds of the total transactions (446.77 crore) recorded during the month.

The credit cards segment, which is another major mode of payments in the country, is also dominated by American companies Visa and Mastercard together controlling more than half of the market share.

American card network operators suspended their services in Russia in light of the sanctions imposed on Russia by the United States as a result of the ongoing conflict in Ukraine.

The withdrawal of services from Russia by these companies means that any cards issued by banks globally on these networks will not work anymore in Russia at PoS terminals or ATMs. Further, cards issued by Russian banks on these networks will also stop working outside the country.


RuPay emerging challenger

Domestic card operator RuPay has emerged as the biggest challenger to US majors Visa and Mastercard. In this context, the two companies had recently raised concerns with the Centre about ‘level playing field’.

As per data from the National Payments Corporation of India (NPCI), PhonePe saw 212.02 crore transactions worth Rs 4.08 lakh crore in February, while Google Pay recorded 152.41 crore transactions worth Rs 2.91 lakh crore. The third and fourth biggest Unified Payments Interface (UPI) apps were Paytm Payments Bank, with 61.38 crore transactions worth Rs 72,204.32 crore, and Amazon Pay, with 6.35 crore transactions worth Rs 6,044.47 crore.

Interestingly, the cards space has layers to it with the scales tipped in the favour of the foreign players. According to a January 2021 report by the Reserve Bank of India (RBI), with 60.36 crore cards issued, the NPCI’s RuPay card had more 60 per cent share in the number of cards issued as of November 30, 2020. But a significant chunk of this was from debit cards, with only 9.7 lakh RuPay credit cards being issued as of November 2020.

The significant lead for RuPay in number of debit cards notwithstanding, the value of card payments made through point-of-sale (PoS) machines using credit cards, where the American card network companies like Visa and Mastercard enjoyed a majority share, far exceeded those done using debit cards.

During January 2022, RBI data showed that Rs 87,768.50 crore worth of credit card transactions were made at PoS terminals, while debit card transactions at PoS terminals stood at Rs 59,494.77 crore.

However, the debit card-led expansion of RuPay in the cards segment to have over 60 per cent share in November 2020, compared with only 15 per cent in 2017, did manage to unsettle Visa and Mastercard.

In August last year, Visa had reportedly raised concerns about a “level playing field” in India during a meeting with US Trade Representative Katherine Tai. It had specifically flagged India’s “informal and formal policies” that “appear to favour” the business of NPCI, which runs RuPay. Mastercard, led by Indian-origin executive chairman Ajay Banga, had also raised similar concerns back in 2018.

The Reserve Bank, in July last year, had banned Mastercard from issuing any new cards for not complying with data localisation requirements.

However, in terms of ATM transactions, which are driven by debit cards both in volumes and value, a hypothetical withdrawal of services by foreign companies like Visa or Mastercard is unlikely to affect ATM operations given that transactions at the automated teller machines are conducted through the NPCI-run National Financial Switch.

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