US majors continue to dominate the cards and payments ecosystem; domestic companies are gaining ground

The sanctions-triggered withdrawal of card payment networks like Visa and Mastercard from Russia sheds light on the dominance of US-based companies in the global payments ecosystem.

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In India itself, the top two UPI payment apps — Walmart-owned PhonePe and Google Pay — accounted for 364.43 million UPI transactions in February, accounting for over two-thirds of the total transactions (446.77 million) made during the month month were recorded.

The credit card segment, another major means of payment in the country, is also dominated by American companies Visa and Mastercard, which together control more than half of the market share.

American card network operators suspended their services in Russia amid sanctions imposed by the United States on Russia as a result of the ongoing conflict in Ukraine.

The withdrawal of services from Russia by these companies means that all cards issued by banks worldwide on these networks will no longer work in Russia at PoS terminals or ATMs. In addition, cards issued by Russian banks on these networks will no longer work outside the country either.

According to data from National Payments Corporation of India (NPCI), in February, PhonePe recorded 212.02 million transactions valued at Rs 4.08 billion while Google Pay recorded 152.41 million transactions valued at Rs 2.91 million. The third and fourth largest Unified Payments Interface (UPI) apps were Paytm Payments Bank with 61.38 billion transactions worth Rs 72,204.32 billion and Amazon Pay with 6.35 billion transactions worth Rs 6,044.47 Rs.

Interestingly, the card room has layers, with the scales tipped in favor of foreign players. According to a January 2021 Reserve Bank of India (RBI) report, NPCI’s RuPay card accounted for more than 60 percent of the number of cards issued as of November 30, 2020, with 60.36 million cards issued. But a significant one Part of this was from debit cards, with only 9.7 lakh RuPay credit cards being issued as of November 2020.


RuPay emerging challenger

Domestic card operator RuPay has emerged as the biggest challenger to US majors Visa and Mastercard. In this regard, the two companies had recently raised concerns about a “level playing field” with the center.

Despite RuPay’s significant lead in the number of debit cards, the value of card payments made through credit card point-of-sale (PoS) machines, in which American card network companies like Visa and Mastercard had a majority stake, far exceeded them done with debit cards.

As of January 2022, RBI data showed that credit card transactions worth Rs.87,768.50 crore were made at PoS terminals, while debit card transactions at PoS terminals stood at Rs.59,494.77 crore.

However, RuPay’s debit-led expansion in the card segment to over 60 percent share in November 2020, compared to just 15 percent in 2017, managed to unsettle Visa and Mastercard.

In August last year, Visa reportedly raised concerns about a “level playing field” in India during a meeting with US Trade Representative Katherine Tai. It had specifically highlighted India’s “informal and formal policies” that “apparently favor” the business of NPCI, which runs RuPay. Mastercard, led by Indian-origin executive chairman Ajay Banga, had raised similar concerns back in 2018.

The Reserve Bank banned Mastercard from issuing new cards last July because they didn’t meet data localization requirements.

However, with regard to ATM transactions driven by debit cards in both volume and value, a hypothetical withdrawal of services by foreign companies such as Visa or Mastercard is unlikely to affect ATM operations, as transactions at ATMs are conducted via the NPCI- managed National Financial Switch.

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