Visa Complains To U.S. Govt About Uneven Playground Over Rival RuPay In India
Visa Inc is reportedly complaining to the U.S. government over the Indian government’s promotion of Visa’s domestic payments rival RuPay.
While Visa publicly downplayed the issue, U.S. government memos revealed that Visa complaines about a lack of level playing field in India during an Aug. 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly. Visa is not alone as Mastercard Inc also raised similar concerns privately with the USTR.
"Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India" (NPCI), the non-profit that runs RuPay, "over other domestic and foreign electronic payments companies," read a USTR memo prepared for Tai ahead of the meeting.
The root of Visa’s allegations against the Indian government
Indian prime minister Narendra Modi has publicly promoted homegrown RuPay for the past few years, creating an unfair disadvantagebto Visa and Mastercard in the fast-growing payments market. As a result, last year RuPay accounted for 60% of India’s 900 million debit and credit cards issued, a massive jump from just 15% in 2017.
In May, Kelly downplayed the issue, saying that for years there was "a lot of concern" that the likes of RuPay could be "potentially problematic" for Visa, but his company remained India’s market leader.
"That’s going to be something we’re going to continually deal with and have dealt with for years. So there’s nothing new there," he said.
In a 2018 speech, Modi likened the use of RuPay to patriotism, declaring that since "everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation."
Last year, Finance Minister Nirmala Sitharaman also urged local banks to promote only RuPay. The Indian government also promoted a RuPay-based card for public transportation payments.
Visa, on 9 August during the USTR gathering, cited the Indian leader’s "speech where he basically called on India to use RuPay as a show of service to the country".
The rise of RuPay
However, though RuPay dominates leads in the number of cards issued in India, those numbers are literally numbers. Visa and MasterCard still dominates in the number of transactions that are processed as most RuPay cards were simply issued by banks under Modi’s financial inclusion programme to people who most likely never use them.
Visa told the U.S. government it was concerned about India’s "push to use transit cards linked to RuPay" and "the not so subtle pressure on banks to issue" RuPay cards, the USTR email showed.
Why is the Indian government promoting RuPay cards?
In my own personal opinion, the Indian government is justified in promoting the RuPay card. Here is why:
- RuPay is India’s own card and payment gateway system, developed by the National Payment Corporation of India (NPCI). I see nothing wrong with a nation promoting its homegrown services.
- Visa, Mastercard & American Express are foreign payment networks that have a huge market share in India. Everytime a bank uses their network to process a transaction, even a local transaction, they charge a processing fee for their services. It therefore makes sense and saves exorbitant fees that the Indian banks need to pay for local transactions if they opt for more competent price offered by RuPay.
- Since RuPay is a local service, the fees it charges can benefit India’s economy.
- RuPay reduces India’s reliance on an American service. Relying on American services puts a nation on America’s mercy, for example if America sanctions India, Visa will withdraw its services in India.