India plans to spend around $320 million to promote cards and low-value UPI transactions on RuPay. It is the latest in a series of moves by New Delhi to boost the growth of its payment network.
New Delhi on Wednesday approved a plan to spend $318.4 million to facilitate RuPay debit cards and small person-to-person transactions on UPI during the current financial year ending March 2023.
“Under this scheme, the acquiring bank will have financial incentives to facilitate point-of-sale (PoS) and e-commerce transactions using RuPay debit cards and low-value BHIM-UPI transactions (P2M) in the current fiscal year.” Incentives will be available from 2022-23,” it said in a statement.
The move by the government, led by Narendra Modi, is an attempt to allay concerns of banks questioning the financial viability of the UPI network. His UPI, his six-year-old payment network built by the Union of Banks, has become the most popular way for Indians to transact online today. Payment services withdraw money directly from banks, removing reliance on intermediaries. However, it operates with a zero merchant discount rate, a small transaction fee that is one of the main sources of income for banks and card companies.
“Various stakeholders in the Digital Payments System and the Reserve Bank of India (RBI) have expressed concerns about the potential negative impact of the zero MDR regime on the growth of the digital payments ecosystem.In addition, the National Payments Corporation of India (NPCI) requested to, among other things, incentivize BHIM-UPI and RuPay debit card transactions to create a cost-effective value proposition for stakeholders in the ecosystem and increase the acceptance footprint of merchants. and accelerate the transition from cash to digital payments,” New Delhi said.
A fintech executive who requested to speak anonymously on government issues said zero MDR is the main reason for the growth of digital payments in India.
“MDR and high prepayment and subscription costs are one of the reasons why POS machines and card payments did not gain much traction in India until UPI came along. has created its own networks: UPI and RuPay (on cards) where the government mandated zero MDR – Smaller merchants started accepting digital payments, ultimately contributing 0.25% of GDP to American corporate Mastercard And so that I don’t lose to Visa.”
RuPay is India’s own card network promoted by National Payments Corporation of India, a special body of RBI that also oversees UPI payments. The central bank has approached international giants Visa, Mastercard and American Express to store Indian data locally in a series of attempts to expand the reach of his RuPay in South Asian markets. I came.
RuPay is the only payment network whose credit card currently supports linking to UPI. But even though RuPay has made great strides in debit card forays, credit cards on its network have struggled. Several banks, including HDFC, have shown little interest in issuing RuPay credit cards. According to two people familiar with the matter, the issuance of the RuPay credit card has reduced profitability. For example, Tata Neu’s RuPay credit card issued by HDFC does not support linking to UPI.