Monday, October 31, 2011

Visa confident RuPay entry won't affect its dominance: Uttam Nayak, Country Manager, Visa

Source :

Global payment gateway Visa is confident that the entry of domestic payment network RuPay will not hurt its business in India. In an interview with Sangita Mehta, Visa's country manager, Uttam Nayak, talks about trends in the card industry, challenges for Visa and its plans to launch mobile payment product in India. Excerpts :

What are the trends in the cards industry?

On the credit card side, the focus is on premium customers. Focus is moving away from card numbers to profitable customers. Inactive card is draining a lot of their resources. So, the idea is to get fewer customers who use the card and that is where banks earn revenue. That is why there is attrition of cards by 7%, but transactions have grown 19% and spends have risen 30%.

All non-profitable, delinquent and inactive accounts have been closed. Also, a couple of players have exited and few others have slowed down. The big success has been on debit and prepaid cards. As banks continue to open new accounts, debit card issuance also grows. The growth is about 25% a year. People are using lesser cash and transacting more at point-of-sale and internet. Cash to cash-less migration is happening. E-commerce is growing for services such as buying movie tickets or paying bills.

What are the changes that are emerging on the payments side?

We have witnessed two big changes. One is the power of mobile. The frauds have gone up in the market such as counterfeiting at ATMs or point of sale. However, with SMS alert mandated by the regulator and the minute a card is misused the customer gets an SMS alert. Also, mobile payment and mobile banking and mobile way of transacting are significantly increasing. The second change is the increase in online transactions.

So isn't this a challenge for Visa?

We welcome it. To get physical point-of-sale terminal costs more money while online acceptance is much cheaper.

What are the challenges for you with Interbank Mobile Payment System (IMPS) kicking in?

It is account to account transfer and it is early days. One has to wait and see how it picks up.

So it has yet not affected your business? How is Visa gearing to meet competition from National Payments Corporation of India on IMPS?

One of the key things a customer looks for is frictionless payment. We had rolled out mobile payments in some countries and it failed or did not take off, because it had a lot of friction.

If Visa rolls out any such product will it be without any friction?

Absolutely. We are currently rolling our mobile payment product, which is a joint venture with Monetise. It addresses this point of being frictionless and customers don't need to provide any other piece of information. It will be rolled out end of this quarter or early next year.

National Payments Corporation of India will soon launch RuPay card, what would be the challenges for you?

There is no challenge. Visa and MasterCard have existed for 30 years and we have put all our might in what we call are priority market. Yet, if there is only 3% penetration that means that efforts have not been enough and investments have not been enough. So, more players have to come in. Where I look for answers is the kind of investment they are going to bring in.

There could be a fear that even this 3% could go to them?

The customer looks for convenience, security and reliability and NPCL has to say they have it. The customer has to touch and feel and see it. 

Given that it is PSU-promoted and they control 70% of the market share, could significant portion of customers shift to RuPay?

Customer looks for newer and superior products and value addition and that is where they will shift. And that is our core strength. We are innovative and have attractive marketing campaign. We have consumer insight and use that information to come up with better products. So, as long as we keep doing that we don't see any competition as a threat. If that was the case, we would not be making a significant investment in this country. The mobile platform is a joint venture and we have put a lot of money to develop it.

That could be in response to RuPay coming in?

No. It's part of our strategy. We have been here for 30 years, and consistently Visa has been investing and growing in this market.

Tuesday, October 4, 2011

Rupay Card Launch Date - Rupay Card launch by fiscal end: NPCI

Source :
Nearly a year after the soft launch as a limited-service debit card, the Rupay Card, which is the domestically developed equivalent of the Visas and MasterCards of the world, will offer full-service debit card services by the end of this fiscal. 

"We hope to commercially launch the Rupay Card before the end of this fiscal. We will be equipped to offer full service debit cards to our mainstream partner banks by February or March next," National Payments Corporation of India (NPCI) MD and Chief Executive Abhaya Prasad Hota said. 

"By then, we hope to integrate our software with the nearly 4.5 lakh merchant terminals across the country," he said. 

NPCI, set up by the Reserve Bank, has developed the Rupay Card in April. In 2009, RBI had asked the Indian Banks Association to launch a not-for-profit company and design a rival card to Visa and MasterCard. China has already developed a similar card called the Union Pay of China. 

Since April, the Rupay Card has been in use, mostly by rural and urban cooperative banks offering limited service. 

NCPI has so far roped in four banks -- two urban cooperative banks, one regional rural bank, and one mainstream commercial bank, Bank of India, which has issued this card to its financial inclusion customers. 

Hota said that five more banks, including mainstream banks like Corporation Bank and Syndicate Bank, are testing the card now and the former will complete the process by next week. 

The Rupay Card, once commercially launched as a full service debit card, would eventually replace global real-time payment processing leaders--Visa and MasterCard --from the domestic payment system, the NPCI head said. 

Hota further said that leading financial consultancy firm Ernst & Young India is assisting NCPI in developing and rolling out the national payment switch (NPS) software that is needed for the commercial launch. 

On delay for commercial launch of Rupay Card, NCPI chief Hota said that there are over 4.5 lakh merchant terminals in the country and without altering the software of these terminals, a national launch cannot take place. 

"We have to individually feed our software into these merchant terminals. But remote tweaking can be done only on around 40,000 of them. The rest have to be done individually. 

Out of the 4.5 lakh PoS (point of sale terminals), around 80,000 are cash machines and can thus be tweaked remotely. 

Thus around 1.2 lakh units will be ready for our software by next month," Hota said. 

For the rest of the PoS terminals, the corporation has already formed teams to go around the country to do the changes, he added. 

On the commercial fees that NPCI would be charging from the banks for the card, he said, "We plan to charge only 0.3 per cent of the transaction amount as our fee, as our objective is not immediate profit-making but popularising the card." 

Visa and MasterCard charge much higher than 0.3 per cent, but Hota did not specify the number. 

These foreign operators could not be contacted to check our their fee structure.
According to Hota, payments that banks pay to these overseas payment gateways is around Rs 400 crore annually. 

Today domestic banks have no option but to tie up with Visa or MasterCard for connectivity between cardholders, merchants and issuing banks not just within the country, but across the globe in the absence of a domestic card. 

In 2010, according to RBI data, domestic banks paid around Rs 500 crore as fees to these global card firms for processing their payments, 90 per cent of which were domestic transactions. 

Hota is hopeful that NPCI can make the card break-even within two-five years of commercial launch. 

The member banks have already invested around Rs 100 crore so far in the project. Of this, Rs 60 crore have gone into developing the Rupay Card and building the NPS network, Hota said. 

Hota also said he does not have immediate plan to enter the credit card space, saying that will involve tying up with external payment gateways, which would push up charges. 

"Hopefully we may be able to do that from the fourth year onwards. But our priority is the debit card segment now. 

Also, the full service debit cards will be only domestically operable as international debit cards will be costly for the banks." 

But he pointed out that as much as 95 per cent of the debit card transactions are done within the country only. 

Another area that NPCI is evaluating is the pre-paid cards market, which include travellers cards, gift cards and salary cards. 

As per the latest RBI data, debit card transactions rose 45.6 per cent in June to Rs 3,784 crore in June from Rs 2,597.5 crore y-o-y. There were over 23.95 crore debit cards in use in the country as of June 30, up 24.8 per cent over 19.19 crore in the year-ago period. 

Against this, credit card transactions rose 30 per cent in the month to Rs 7,191.11 crore, from Rs 5,538.75 crore y-o-y, despite a 6.7 per cent drop in the number of credit cards in circulation to 1.76 crore during the month. 

As per the data, credit card deals during the first quarter of this fiscal stood at Rs 22,127.5 crore, as against Rs 16,948 crore y-o-y, a jump of 30.5 per cent.
In 2010-11, transactions through credit cards went up 22.15 per cent to touch Rs 75,516 crore, while debit card transactions rose 46.46 per cent to Rs 38,692 crore. 

NPCI is registered as a company with nine public sector, private sector and foreign banks owning stakes. RBI will oversee its operations in initial years, but will be regulated by RBI throughout.