November 8th, 2016, would be marked as a historical day when high-denomination currency notes were demonetized by the Modi government in a bid to curb black money.
November 8th, 2016, would be marked as a historical day when high-denomination currency notes were demonetized by the Modi government in a bid to curb black money. Although the move drew both wide criticism and appreciation from different people, it accelerated the pace of non-cash payments in India, which is sure to give the use of plastic money a huge boost.
Interestingly, the current global payment card network industry is dominated by just a few players. Among these global players, Visa and MasterCard enjoy a dominant market share.
What is RuPay card?
RuPay is an Indian card scheme which was launched by the National Payments Corporation of India (NPCI) in March 2012 as an alternative to the MasterCard and Visa card schemes. Started as IndiaPay, it was later renamed as RuPay, which is a combination of rupee and payment.
RuPay also provides payment gateway services for online payments. It is accepted at almost all ATMs and most of the e-commerce websites (approx. 10,000). About 240 banks, including all major public sector banks, currently issue RuPay cards to their customers.
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Need/Objective of RuPay cards
Banks while issuing Visa or Mastercard have to incur extra cost which is paid to these companies. A low-cost alternative suitable for the Indian banking channel was needed so that debit cards could have a reach in the rural banking system also.
To act as a vital tool in the financial inclusion drive by involving all economy classes in the banking system. Secure the data of Indian customers within the country as they do not have to share the information to international players like Visa or MasterCard. Reduce the usage of cash and to allow all the financial transaction to be a part of the economy
Status of RuPay cards in India
RuPay cards hold about 40% market share in India , second to VISA cards
Around 30 crore cards have been issued since RuPay’s inception in 2012.
Out of total cards issued, the share in Jan Dhan account is around 18 crore
Average transaction size is INR 3,045 in ATMs
Waiver of various fees and charges makes it far cheaper option for the banks as compared to VISA and Mastercards.
How demonetization impacts RuPay cards
“The demonetization move has definitely given a great boost to the circulation of RuPay cards as more accounts are intended to be opened and due to shortage in currency notes, the transaction size as well as the number of transactions would also increase. It comes as an ideal opportunity to promote the usage of RuPay cards as a lot of cashless transactions are expected to happen,” says Nitin Vyakaranam, Founder & CEO, ArthaYantra.
Even the dormant cards which were issued with bank accounts would be used.
The real challenge is the penetration in the mainstream business as most of the cards were issued during the Jan Dhan schemes and most of these accounts have zero balances. Also, the transaction size is very low.
About a half of the population does not have a bank account despite the rollout of schemes like Jan Dhan Yojana and No-Frill accounts. The real difficulty lies in making the banking infrastructure strong and made available to the remotest places in India. “As per the World Bank data, there are 13 bank branches per 100,000 of adult population.
That makes it 7,692 customers per bank. But the distribution of these branches is uneven. With other products and services by RuPay like Kisan cards, Milk procurement cards and other services targeted at rural areas, the Indian banking system needs to reach every village to make the scheme a success and also help in empowering the economically-backward sections of the country,” says Vyakaranam.