For some time now, plastic money or debit and credit cards have become the preferred payment mode for most developed nations. Even in India, a majority of the urban masses prefer using cards for making payments. Until recently, almost all cards were supported by Mastercard or Visa, two of the most popular international card networks in the world. So, every time a private or public sector bank in India wanted to introduce its own debit or credit card, it had to pay additional fees and transaction charges (for every transaction made) to Mastercard or Visa. While Mastercard and Visa were important for India’s foray into the card space, in the long run, this could lead to a significant drain to funds due to higher transaction costs. Additionally, the high transaction charges can act as a limiting factor to extend banking support to the vast unbanked segments in India, especially in the rural belts.

This economic divide among the population is what the government has been trying to bridge over the years. At both a systemic and grass root level, the government has been making several efforts like setting up a robust network of banks, introducing zero-balance savings accounts etc in order to bring about financial inclusion in the country. It is this objective of financial inclusion, to provide everyone easy and any time access to financial services and instruments at a reasonable cost that led to the introduction of RuPay, the first domestic card network and payment gateway that is multilateral and open loop. RuPay derived from the words ‘rupee’ and ‘payment’ was launched by the National Payments Corporation of India (NPCI) on March 26th 2012, in order to integrate the various payment systems in India. RuPay is India’s first and only domestic card network.

RuPay provides a solid foundation and the right infrastructure towards building a less-cash, digital economy. RuPay reduces India’s dependence on external card networks like Visa and Mastercard and allows public and private sector banks to issue and manage cards at reasonable rates. In addition, being India’s very own card network, RuPay can be leveraged for several economic and social initiatives within the country.

Let’s now understand the workings and advantages of RuPay Cards:

How do RuPay cards work and why is it better for the Indian consumer?

RuPay cards work like all other cards from Mastercard and Visa and are accepted across a majority of ATMs, POS terminals and online platforms or e-commerce websites. Currently, RuPay cards can be used at nearly all ATMs, POS terminals and over 10,000 websites in India. Indian consumers can apply for RuPay cards through any public, private, regional or co-operative bank. RuPay cards are enabled with EMV (Europay, Mastercard and Visa) chip technology, the global standard for debit and credit cards.

RuPay cards are currently available as debit cards and credit cards will be available in the near future. Designed to suit domestic needs, RuPay was specifically built to address the needs of consumers, merchants and banks in India. The domestic card payment network has several advantages to the Indian consumer, as follows:

Lower Cost – The cost of clearing and settlement of transactions will be reduced due to domestic systems. This makes card processing for banks more affordable. In fact this cost effectiveness is the primary and significant differentiator between RuPay and other international card networks. Even for merchants, the MDR (merchant discount rate) is much less when compared to other cards.

Versatility – RuPay cards are designed to be interoperable across all payment channels like ATMs, mobile banking, merchant locations, online channels, cheques etc.

Better suited for rural/untapped markets – The low transaction and processing costs, makes RuPay more economically feasible for both banks as well as consumers, hence making it a digital payment solution that can be easily leveraged by the rural and untapped segments of the society.

Ability to be linked with other socio-economic initiatives – Powered and managed completely by the RBI in India, RuPay has the ability to lend itself to socio-economic initiatives for financial inclusion. Initiatives like the the Pradhan Mantri Jan-Dhan Yojana, a programme that aims to provide banking facilities to every household in India or the IRCTC RuPay card scheme that allows passengers to easily book train tickets through a pre-loaded card.

Differences between RuPay and other card networks

The primary difference is that RuPay is a domestic card network, while Mastercard and Visa are international networks functioning outside of India. The other differences between RuPay and other card networks are as follows:

RuPay Card Network Other Card Networks
Transaction cost Lower transaction costs on account of domestic clearing and settlement Higher transaction costs due to international settlement process
Integration costs Banks need not pay a quarterly fee or entry fee to integrate with the card network Banks need to pay quarterly fee or entry fee to integrate with the card network
Data storage All transaction data and customer information processed through RuPay reside within India All transaction and customer in formation moves outside of India for processing
Card types supported All transaction data andCurrently supports only debit cards, with credit cards to be launched in the near future customer information processed through RuPay reside within India Supports both debit as well as credit cards
International Acceptance Does not currently support international transactions within India Accepted at all domestic and international locations

Applying for RuPay Cards

All citizens of India can avail RuPay cards from almost any public, private, regional or co-operative bank. An interested customer can approach any bank, submit simple KYC information, open an easy savings account and obtain a RuPay Debit Card.

How RuPay brings about financial inclusion in India

Financial inclusion was one of the biggest objectives for RuPay and since its inception in 2012 RuPay has supported several programs towards bringing about financial inclusion. Some of the initiatives that RuPay has been associated with are:

Pradhan Mantri Jan Dhan Yojana (PMJDY) – The program was launched in August 2014 and aims to provide easy access to banking facilities through the creation of at least one bank account per household, in order to bring the entire nation under the fold of the banking system. This program also aims to provide access to easy credit, insurance and pension to the unbanked segments of the country, especially in the rural areas. All the participants under PMJDY were provided a RuPay debit card with an inbuilt accident cover of Rs 1 lakh. This RuPay card thus automatically provides the previously unbanked strata the power to securely save money and the ability to transact digitally, anytime at anyplace. Close to a 100 million RuPay cards were issued under this scheme.

IRCTC RuPay Prepaid Cards – IRCTC (Indian Railway Catering and Tourism Corporation) in collaboration with the Union Bank of India launched the IRCTC RuPay Prepaid Card, that allows passengers to easily book train tickets in India. The card comes with several benefits like zero transaction cost on train ticket booking for the first 6 months, accidental insurance upto Rs. 2 lakhs and loyalty/reward points for train bookings made through the card.

RuPay Mudra Card – Mudra (Micro Units Development and Refinance Agency Ltd) Bank launched the Pradhan Mantri Mudra Loan Yojana to provide advanced methods of funding to small scale industries in India. With the objective of “Funding the unfunded”, the yojana has been structured keeping in mind the financial needs of the rural public. This innovative scheme collaborated with RuPay to make credit facilities easily accessible to beneficiaries through RuPay cards.

Cash@POS is another innovative program by RuPay that allows RuPay card holders to withdraw up to a certain fixed amount from merchant POS terminals, just as cash or along with other purchase of good or services. Services like these can prove to be very significant in places with low ATM density. Even regional rural banks (RRBs) and cooperative banks are issuing RuPay cards in tier 2 and tier 3 cities, thereby improving the footprint in remote corners of the countries.

While RuPay’s main focus is to improve the reach of banking services in the country, it also aims to enhance its overall services and position itself as a reliable, premium brand in the payment cards space. In order to fulfil this objective, the National Payments Corporation of India (NPCI) has tied up with Discover Financial Services and and Diners Club and through this association all RuPay card holders can utilise Discover, Diners Club International and PULSE networks for international purchases and cash access outside of India. Another such initiative is the RuPay Platinum Card, that was built to attract the premium segment of customers in the country. The card offers value added benefits such as cashback on utility bills, complimentary airport lounge access, and insurance cover among others. Other international associations include strategic associations with Japan’s JCB International & China’s UnionPay. On the technology front, RuPay is also looking to enhance the product through innovative payment technologies like contactless payments.

RuPay’s growth journey

RuPay has been seeing a promising growth since its launch and commands a good market share in the cards market today; nearly 40% of all cards issued in the country are RuPay cards. RuPay card usage at POS terminals rose from 3.83 million rupees in April 2016 to to 28.09 million rupees in March 2017, likewise, RuPay card usage on online platforms also saw an increase from 2.78 million in April 2016 to 14.38 million in March 2017, signalling a multifold increase in adoption from customers as well as merchants. Even the average ticket size for withdrawals at ATMs compared well with other cards; for instance, in the month on Jan 2016, the average ticket size of ATM withdrawals from RuPay cards stood at Rs.3042, while that from other cards were around Rs 3092, indicating a marginal difference between the two.

In the light of the recent demonetization initiative, there has been a significant spurt in RuPay card transactions as well. RuPay card usage at merchant terminals soared seven times since November 8, taking the daily volumes from 3 lakhs to over 2.1 million. While the demonetization by itself could have caused some inconvenience, the larger goal that India is marching towards is a cashless, digital economy that provides easy access to banking and financial services to everyone, while ensuring complete transparency. RuPay is the foundation of the ecosystem and today India has developed several innovative and effective solutions like UPI and Aadhaar Pay that have the potential to transform the way Indians transact.

While the issuance of RuPay cards has risen, transactions from the cards has not gone up commensurately. Increase in the volume of transactions is what will define the reliability and success of the card network. Even on our on payment gateway, transaction volumes on RuPay cards has only increased marginally over the past 6 months. While distribution of the cards is notable (by means of several national level schemes), similar efforts towards increasing adoption and engagement have not been made; localisation of transaction modes is one of the missing parts to the success of RuPay. A large number of RuPay cards have been provided to people in tier 1 and tier 2 cities, where regional languages are the primary language but transactions modes in many of the cases (like online banking) only provide support in English, proving to be a big barrier to adoption. Thus, RuPay while being a solid product, still needs to build a strong ecosystem that truly supports the needs of India’s unbanked segments to bring about financial inclusion in a true sense.