Wednesday, April 4, 2012

Banks can save Rs300 crore annually by switching over to RuPay: NPCI


“Adoption of the RuPay Card will help banks save Rs250-Rs300 crore annually as our interchange charge is cheaper by up to 40% than what banks pay to foreign cards like Visa and MasterCard,” NPCI managing director and chief executive officer AP Hota said

Mumbai: A switchover to RuPay Card, the Indian version of Visa or MasterCard, can help domestic banks save as much Rs300 crore annually in transaction fees, reports PTI quoting the National Payments Corporation of India (NPCI), which launched the card last week.

“Adoption of the RuPay Card will help banks save Rs250-Rs300 crore annually as our interchange charge is cheaper by up to 40% than what banks pay to foreign cards like Visa and MasterCard,” NPCI managing director and chief executive officer AP Hota told PTI.

After years of preparation and soft launch, NPCI commercially launched RuPay Card on 26th March with major banks such as SBI, BoB, UBI, BoI, Corporation Bank and Axis Bank launching their domestic debit cards on the RuPay platform.

This makes the country second after China to have an indigenous electronic payment card.
Typically, banks pay around 1.8% of the transaction value in interchange charges. This is shared between the payment gateway operators like Visa and MasterCard, the card issuing bank, and the merchant.
While the card-issuing bank charges around 0.25%-0.30% of this, an equal amount is taken in by the merchant too, with the rest being retained by the card company such as Visa.

But Mr Hota said NCPI will retain only up to 60% of this around 1.2% going by the current fee structure.
According to the banks, foreign cards charge around $30,000-$50,000 as one-time fee and around $10,000-$30,000 quarterly.

In FY09-10, according to the Reserve Bank of India (RBI), domestic banks coughed out Rs490 crore in interchange charges to Visa and MasterCard.

For RuPay, there will be no one-time joining fee, and other charges would be around 40% less.
All the major banks are likely to be on the RuPay network in six months, Mr Hota said, adding that there was no compulsion to switch to the RuPay. “Our low cost should be reason enough for them to adopt our card. By March 2015, I expect at least half the market under the RuPay.”

His optimism comes from the low penetration among the regional rural banks, co-operative banks and small commercial banks due to high cost of joining foreign card payment system.

Another advantage, he said, is that as the transaction happens domestically, it will lead to lower cost of clearing and settlement, apart from the facility of paying in rupee.

Being a not-for profit company also helps us lower the cost, Mr Hota said.

He also said the RuPay would make debit cards safer by incorporating the pin number with each transaction. At present, only MasterCard requires the user to furnish the pin number every time the card is used.
RuPay will be accepted at all the 91,000 ATMs and over 6 lakh points of sale terminals in the country and in due course, it will be accepted on the Internet and also at ATMs/PoS terminals abroad. NPCI has finalised an arrangement with payment gateway Discover for international acceptance.

According to RBI data, there are nearly 27 crore debit cards in the country today.

SBI managing director and chief financial officer Diwakar Gupta said that though there is no compulsion, it makes business sense for banks to adopt RuPay.