How did RuPay aid in the Financial inclusion of India
This post has been authored by Manisha Rikkula, the Research Analyst Intern at Arthashastra Intelligence.
RuPay is India’s first indigenous card payment network, with widespread acceptance at ATMs, POS terminals, and e-commerce websites. It was created to compete with worldwide payment networks and was an NPCI product launched in 2012. It was brought into prominence in 2014 by the revolutionary announcement of the Pradhan Mantri Jan Dhan Yojana. RuPay has introduced a variety of card versions in the last seven years to cater to various segments of society.
Magnificent growth of RuPay
Rupay has made such rapid progress in the Indian payment industry that it only accounted for 0.6 percent of all cards in 2013, but in just four years, it had surpassed Visa as India’s largest payment card with 375 million transactions, and by 2020, it had a 60 percent market share in the Indian car market. It put an end to Visa and Mastercard’s multibillion-dollar monopoly in India.
The RuPay card transactions in E-Commerce, in volume terms, have risen 112.18% during 2014-21, whereas the value of transactions has witnessed a whopping 1633.529% growth over the same period.
The RuPay card usage at POS, in volume terms, has risen by 671% during 2014-21, whereas the value of transactions has gone up by 130 % over the same period.
What made RuPay emerge as a significant market player?
This was made possible by the central government announcement of a Rs 1,300 crore package to compensate banks for the zero merchant discount rate(MDR).MDR is a cost charged to merchants for processing UPI, digital wallets, debit, and credit card payments. With the rise of digital payments, most merchants set up a payments processing facility agreed to pay a fee, often between 1% and 3%. Rupay has the advantage of charging a set rate of 60 paise for the acquiring bank and 30 paise for the issuer bank, resulting in a transaction fee of only 90 paise, which is a huge advantage to both merchants and customers. The strong will to promote the cashless and digital transactions ecosystem of the government is where RuPay derives its thrust from. Apart from this, RuPay aids in the prevention of forex loss. Every transaction involving foreign card issuers incurs a transaction fee that is sent out of the nation, amounting to an estimated $400 million each year. An autonomous financial system is possible with RuPay, thereby relieving the threats of data security by the way of eliminating the monopoly of foreign players.
Role in Financial Inclusion :
Financial inclusion was one of RuPay’s main goals and has backed several initiatives aimed at achieving it.
● The Pradhan Mantri Jan Dhan Yojana (PMJDY) intends to give each household at least one bank account. All PMJDY participants received a RuPay debit card with a Rs 1 lakh accident insurance built-in. As a result, the hitherto unbanked strata now can securely save money and transact digitally.
● The IRCTC RuPay Prepaid Card allows travelers to book train tickets in India quickly and easily.
● The Pradhan Mantri Mudra Loan Yojana was created by Mudra (Micro Units Development and Refinance Agency Ltd) Bank to provide advanced means of funding to small size enterprises in India to finance the unfunded. This was possible by RuPay Mudra Card.
● RuPay’s Cash@POS program allows RuPay cardholders to withdraw up to a set amount from merchant POS terminals, either as cash or in conjunction with other purchases of goods or services. This kind of service can be extremely useful in areas where ATM density is low. RuPay cards are now being issued by regional rural banks (RRBs) and cooperative banks in tier 2 and tier 3 cities, expanding the country’s footprint.
Challenges that lie ahead :
Before celebrating much of RuPay’s success, the following should be looked upon.
- Despite its affiliation with worldwide payment networks, the RuPay card has a very limited international presence.
- Due to their increased acceptance and comfort acquired over time, consumers traveling overseas choose Visa, MasterCard, and American Express. This was due to the customer’s brand appeal.
- Since RuPay is in the hands of the government entity, NPCI, the incentive for being competitive may die out. This was true in the case of BSNL for instance. For this scenario to not emerge a robust long-term plan must be devised.