Laxmi Gunupudi
Laxmi Gunupudi

Jun 20 2016

The RuPay Way

The RuPay Way

Rupay: A Robust Payment System

RuPay is a relatively new card based payment system introduced in India. To understand this payment system in detail, let us take a look at payment systems in general and some of the important aspects of a payments system.

Payment systems are methods used to settle financial transactions and are very important components of a healthy economy. Payment systems are introduced and managed by payment system providers targeting a specific segment of customers. Each payment system competes with other similar product offerings in the market. They are characterized by certain specific features such as the underlying technology, product offerings and nature of transactions that are enabled by the system. They have a defined boundary or scope within which they operate and position themselves to cater to a specific segment of the population. They also have specific marketing strategies to reach out to their potential customers. These providers collaborate with the others in the payment space and are bound to operate within the regulatory framework. The following framework encapsulates these important aspects of a payment system:

The payment systems framework can also be applied to the RuPay card. RuPay is an Indian domestic card scheme conceived and launched by the National Payments Corporation of India (NPCI) on 26th March, 2012. It was created to fulfill the Reserve Bank of India’s desire to make available a domestic, open loop, and multilateral system of payments in India. RuPay facilitates electronic payments at all Indian banks and other financial institutions. It has been positioned as an alternative to other card payment systems such as Visa and MasterCard and to consolidate and integrate various payment systems in India.

Rupay primarily provides debit cards. Apart from this, Rupay also issues ‘Kisan Credit Cards’ for farmers. IRCTC RuPay Pre-Paid Debit card was launched on 24th March2015 for online booking of railway tickets. There are many other applications of the RuPay payment system such as Concierge Services, Fuel Surcharge waiver, IRCTC cashback, Utility bill payment cashback and Domestic Lounge access.

RuPay, being a domestic scheme is committed towards development of customized product and service offerings for Indian consumers. There are under-penetrated/untapped consumers segments in rural areas that do not have access to banking and financial services. The correct pricing of RuPay products would make the RuPay cards more economically feasible for banks to offer to their customers. Banks in India are authorized to issue RuPay debit cards to their customers for use at ATMs, PoS terminals, and e-commerce websites. About 240 banks, including all major public sector banks, currently issue RuPay cards to their customers, RuPay cards are also issued at about 200 cooperative and rural banks to promote financial inclusion. In addition, relevant product variants would ensure that banks can target the hitherto untapped consumer segments. According to the latest news on the RuPay website, a Virtual RuPay card will be launched soon. RuPay cards presently have over 35% of market share in Indian card payment scheme only to be surpassed by Visa enjoys 50% of the market share. More than 20% of the transactions in India is done through RuPay cards in India today.

RuPay's parent organization, National Payments Corporation of India (NCPI) has been backed by 10 leading banks, of which 6 are public sector banks, namely State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India and Bank of India; 2 private sector banks ICICI bank and HDFC Bank with 2 foreign banks namely Citi Bank and HSBC. Regulations are issued by NPCI to its franchisee/member Banks. They have to adhere to the terms and conditions laid out by NPCI in the process of issue and use of these cards. NPCI also maintains ties with Discover Financial, to enable the card scheme to gain international acceptance.


RuPay card is uniquely positioned to offer complete inter-operability between various payments channels and products. NPCI currently offers varied solutions across platforms including ATMs, mobile technology, cheques etc. and is extremely well placed in nurturing RuPay cards across these platforms. They are accepted at all PoS terminals, ATMs and e-commerce websites in India.

The Indian market offers huge potential for penetration of cards despite the challenges. RuPay Cards will address the needs of Indian consumers, merchants and banks. The benefits of RuPay debit card are the flexibility of the product platform, high levels of acceptance and the strength of the RuPay brand-all of which will contribute to an increased product experience. Since the transaction processing will happen domestically, it would lead to lower cost of clearing and settlement for each transaction. This will make the transaction cost affordable and will drive usage of cards in the industry. Customer information will be protected as the transaction and customer data related to RuPay card transactions will reside in India. 

RuPay competes with other card based payment system providers such as MasterCard, Visa and Amex in India. India is now the sixth country in the world to have domestic payment gateway system (the other five countries are US, Japan, China, Singapore and Brazil). As of now, the international acceptance of RuPay cards is low, whereas Visa or MasterCard have been in existence for many years and are accepted by most retailers, whether online or offline. However, it offers several advantages in comparison to its competitors:

  • Since every transaction through RuPay will take place within India, the banks will have to pay lesser service charge to the payment gateway as compared to Visa, MasterCard and others. Hence the processing fee is lower. While Visa and MasterCard charge about INR 3 for every e-commerce and point of sale transactions, RuPay charges 90 paisa only.

  • Since processing would be done within India the transactions would be faster as compared to other cards.

  • RuPay does not require banks to pay joining fees or quarterly fees unlike international payment cards such as Visa and MasterCard.

  • RuPay card is offered by large public and private sector banks and small rural and co-opearative banks (with a network of 200-250 member banks) whereas international cards lack such a coverage.

RuPay has gained more than 1/3rd market share in total cards outstanding and 18% share in terms of volume of debit card transactions. Within a short span of time, it has gained over 20% market share in debit card based ATM transactions and 4% share in debit-card based PoS transactions. 

Way forward

RuPay has significant opportunity to scale up and grab a significant share in overall cards business from the existing market leaders in Indian domestic market. This is already visible in their increased marketing efforts to brand the RuPay Platinum card, the launch of the RuPay credit card by September 2016, and the commencement of operations of 11 payments’ banks and 8 small finance banks over next 2 years. In my opinion, given the focus and strengths of the RuPay card in reaching out to a large segment of the Indian population, one can expect a very high penetration of these cards in the Indian domestic market. However, at this point in time, we cannot predict much about its international acceptance. In the long run, it may become the standard switch for domestic transactions and a tough competitor to international players such as Visa and MasterCard.

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