At a time when the nation is witnessing strong waves of digitisation, it is hard to find someone who has not used the debit cards and UPIs. But the cards, either debit or credit, do not work on their own. They actually need a payment gateway.
So, if I say that you have an account in bank but your payment is settled via foreign private payment networks like Visa and MasterCard, it would be a real shock. To counter this dependence on foreign payment networks, India is using an indigenous payment network called RuPay. And the government is looking assured to not only minimise the use of foreign payment networks but to untimely end their business in India.
Union Government provides strength to RuPay and BHIM-UPI
It has been over a decade since the inception of RuPay in India. Launched on March 20, 2012 by the National Payments Corporation of India (NPCI), RuPay has almost became synonymous to ATM-cum-Debit card. There is yet another development that will further consolidate RuPay in Indian payments transactions.
As per the reports, Union Cabinet on Wednesday approved a budget of Rs. 2,600 crores for scheme to promote RuPay and BHIM-UPI. The approval comes after Union Finance Minister Nirmala Sitharaman committed to continue giving financial support for digital payments systems.
In order to make an online payment, there is a certain charge incurred by the payment networks on the merchant. This cost can be a cause of reluctance to make digital payments. That is why, the government has been implementing steps to remove this barrier. In 2021 the budget had a provision of Rs. 1300 crore for incentives. According to the press release, this is the incentive money that will be provided to banks to promote the digital payments across the country without putting the burden of charges on merchants as well as customers.
Also read: With 535,00,00,000 transactions in FY19, UPI comprehensively beats Debit cards in India
When government recognised the potential of RuPay
RuPay being an indigenous payment network has entrenched itself in the debit card segment. The promotion of RuPay by JanDhan scheme and PSU banks has made it the most used payment network for debit cards with more than 60% share.
Since 2014, the government has strived for increased digital transactions but the charges imposed were actually making a large capital outflow. So, after demonetization, RuPay and BHIM-UPI were promoted with almost no charges. But this year the banks stopped promoting zero-MDR. Banks were also lobbying for recovery of their costs in enabling UPI.
This provision of Rs. 2,600 crores is made to not only sustain current trends but also increase the reach of digital transactions to those who still have no access to RuPay and BHIM-UPI. This scheme will incentivize the small amount transactions. The transactions can be made through e-commerce as well.
As per the PIB report, total number of digital payment transactions increased to 8193 crores in FY22 from 2071 crores in FY18. The total value of transactions also multiplied to 9 times in FY22, that is, 81 lakh crores from 9 lakh crores in FY19.
Also read: From 15% in 2017 to more than 60% market share in debit cards by 2020 – Rupay’s growth story
The End of Foreign payment networks
For any development to thrive, there is a need for a robust infrastructure. This need for digitisation was rightly understood by the Prime Minister Narendra Modi. That is probably the main reason that RuPay did not achieved the emphasis it required before the formation of his government. The digitisation led to many important and revolutionary steps like DBT and instant benefit transfer.
These steps will have wide implications on the Indian economy. The growth or hike in digital transactions through RuPay and BHIM-UPI will surely make them the guiding wheel of the Indian economic dominance. While, everything is in the future, one thing is clear that UPI and RuPay are going to bid farewell to MasterCard and Visa.
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