As digital funds morph into strategic property, India is providing a template for different nations in search of to scale back dependence on Western fee networks.
Regulators all over the world are notching up scrutiny on Visa and Mastercard over the charges they cost retailers, however India has chosen a distinct path: Creating rival fee networks which can be more and more sidelining worldwide card networks.
India’s technique builds on the Unified Funds Interface, referred to as UPI, a nine-year-old system that lets shoppers and retailers bypass conventional card networks by connecting financial institution accounts straight via QR codes and cellphone numbers.
The UPI community now processes more than 13 billion real-time transactions monthly — that’s about 71% of all transactions on this planet’s most populous nation — and accounts for 36% of all shopper spending within the nation, in keeping with an evaluation by Bernstein.
UPI’s dramatic success hasn’t gone unnoticed. The native authorities has been leveraging the system’s success to reshape its bank card market with RuPay, a homegrown card community. RuPay enjoys a vital benefit: It’s the one fee system allowed to course of bank card transactions via UPI.
This exclusivity, granted only in 2022, is proving transformative: RuPay processed ₹638 billion ($7.43 billion) in UPI bank card transactions within the first seven months of fiscal yr 2025, almost double from a yr earlier.
These transactions now account for 28% of all bank card gross sales in India, up from 10% final yr, in keeping with Bernstein. (RuPay’s bank card figures don’t embrace swipes at service provider retailers and another transactions, as that information isn’t accessible, so its market share is probably going even increased.)
And final yr, authorities started working aggressively to additional popularize the adoption of RuPay bank cards, a push that many banks initially resisted, citing considerations about dropping interchange charges.
The technique entails cautious calibration of charges. RuPay bank cards on UPI solely cost retailers for transactions value greater than ₹2,000 ($23.3). This construction has specific enchantment for small companies which have traditionally resisted bank cards to keep away from paying service provider charges, for the reason that common UPI credit score transaction at present runs decrease than ₹1,000.
What’s extra, India’s central financial institution final yr ordered lenders to let shoppers select their card community when taking or renewing bank cards, prohibiting unique agreements with world networks. In August, the Nationwide Funds Company of India (NPCI), which oversees each UPI and RuPay, directed banks to make sure RuPay cardholders obtain the identical rewards as different networks.
The push appears to be working: RuPay accounted for half of all new bank cards issued in India in June 2024, in keeping with a latest disclosure by a lawmaker in parliament.
“Assuming UPI linkage stays unique for RuPay playing cards, RuPay is more likely to emerge because the dominant community for bank cards,” a Bernstein report on Friday learn.
“As soon as the QR code primarily based funds change into dominant for credit score primarily based funds too, credit score accounts of banks might be straight linked to the UPI community bypassing the playing cards,” the analysis agency wrote.
Going through such a robust push by the native authorities and altering shopper habits, fee giants Visa and Mastercard have been compelled to alter how they function in India. They’ve partnered with fintechs in latest months to increase card help to UPI-powered service provider terminals, utilized by greater than 10 million shopkeepers in India. It’s fairly the spectacle: The identical card networks didn’t discover it possible to work with such small retailers only a couple years in the past.
However these efforts is likely to be too little, too late. The stratospheric progress of UPI is blowing away the bank card business at giant — bank card’s market share in India’s digital funds fell to 21% in 2024 from 43% in 2018. For Visa and MasterCard, the menace is actual, and the battle is about to go uphill in the event that they don’t discover a technique to flip this chance into a bonus.
