India’s dependence on global maps, in five charts

Earlier this month, Visa and Mastercard, an international duopoly that accounts for 90% of the world’s card transactions (excluding China) decided to suspend its network services in Russia in protest of the invasion of Ukraine. Their actions sparked debate in India, whose neutral stance on the war highlighted similar risks it might face in a larger geopolitical conflict.

This conversation revolved around whether India was overly dependent on companies that could close at a moment’s notice. When it comes to payment transactions, India and Russia are similar in some respects. While cash accounts for about a third of point-of-sale (PoS) payments in both countries, credit and debit cards — the outlet of Visa and Mastercard — account for 36% in India, versus 51% in Russia.

However, e-commerce is changing the payment landscape in India. Digital processes such as e-wallets and instant payment apps account for 45% of e-commerce transactions in India, compared to 28% for credit/debit cards. In other words, while there is a reliance on payment networks like Mastercard and Visa, this space is evolving with digitization.

Russia held out even after this action by the two payment networks. Having previously faced economic sanctions, it built a national payment card system and mandated that all domestic transactions go through it. Mir, the local rival of Visa and Mastercard, accounts for 30% of the debit cards in circulation. However, it faces challenges with international transactions and is reportedly in talks with China’s UnionPay. Similarly, India launched RuPay in March 2012, but it is not yet at a point to meet the challenges of a sudden withdrawal from global players.

RuPay extension

Utilization of RuPay, the National Payments Corporation of India (NPCI) card network, has increased roughly four-fold at POS terminals and roughly 15-fold at e-commerce sites over the past five years. According to the Reserve Bank of India, RuPay’s share of cards issued across the credit/debit card segment has increased from 15% in 2017 to 60% in 2020. 35%, almost entirely from debit cards.

RuPay debit cards received a boost from the government, which introduced the Pradhan Mantri Jan Dhan Yojana in 2014 to provide bank accounts to the poor. To encourage digital transactions, banks have been asked not to charge transaction fees on the RuPay network, a move Visa and Mastercard called protectionist. Visa and Mastercard dominate the credit card market and reportedly accounted for 95% of the credit cards in circulation as of January 2022.

credit game

While the number of debit cards in India is higher, credit cards dominate in terms of transaction value. As of January 2022, there were 940 million debit cards and 70 million credit cards. However, during Transactions worth 60,025 crore were made with debit cards this month, Transactions worth 87,769 crore were made using credit cards.

The credit card market in India continues to expand despite facing challenges from digital modes. In the last five years, the number of credit cards has grown by about 87%. Credit card spending in the first 10 months of 2021-22 exceeded pre-pandemic and full tax levels. Banks have preferred Visa and Mastercard for their credit cards because of their longstanding relationships. The transaction fee is market driven and the banks get most of the share. As such, RuPay doesn’t have the advantage it has with debit cards. Customers also prefer Visa and Mastercard for their global acceptance.

changing landscape

However, the payments landscape has changed significantly, largely due to NPCI’s introduction of the Unified Payments Interface (UPI) in April 2016. Transaction value via UPI has steadily increased, with an initial impetus coming from demonetization. According to RBI, UPI’s share of all retail payments in January was 18%, versus 3% for debit, credit and prepaid cards.

Innovation now focuses primarily on data analytics to assess credit risk and offer other products. This is a big shift for banks that have switched to credit cards for fees and interest income but can now consider other options. According to Venture Intelligence, Indian fintech companies raised a record $6.9 billion in 2021 with 194 deals. While there is no substitute for robust infrastructure provided by Visa, Mastercard and NPCI, the data-centric approach to payments could fundamentally transform business models and the payments industry.

( is a database and search engine for public data)

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