Grow up Visa, compete and not complain
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Recent news reports tell us that the US card hegemons Visa, and earlier Mastercard, have been crying on the shoulders of the United States government against the Indian government’s perceived favouritism to the home grown RuPay card. It is common knowledge that US governments, more so the ones run by the Republicans, stand by their businesses, and hence New Delhi must be ready with a suitable and convincing riposte.
These payment giants have enjoyed near monopolies for decades now. The advent of new technology and fintech revolution has brought about changes in the digital payment paradigm. The mantra that all businesses need to follow in order to keep themselves relevant is to adapt to changes in their respective industries — or else they will fall by the wayside. Whining is not an option here.
Some of the fintech companies and mobile wallets have rendered cards irrelevant, and thus endeared themselves to people who like the convenience of hassle-free payments. This is especially true for small transactions in the course of the humdrum of daily lives.
Also, one can’t resent competition, and the bandwagon effect. It is not just India, Visa’s dominance is seemingly reducing with 55-plus countries around the world creating national payments systems. The gravitas is conservation of foreign exchange as much as realising that digital payments are not exactly rocket science.
The US card majors earlier also resented the Reserve Bank of India’s directive to store payment data in servers in India in the interest of privacy, and also to deny wiggle room for income tax avoidance. Visa has complied by the norms, but Mastercard is not yet out of the woods.
The ‘Aatmanirbhar’ angle behind the government throwing its weight behind RuPay is undeniable. In fact, the RBI and the government have made no bones about their leg up to RuPay. India’s public sector banks still have a stranglehold on the banking business, and Prime Minister Narendra Modi’s PMJDY scheme in 2014 to promote banking among the unbanked strengthened this dominance, and exacerbated the feeling of discomfort for the US payment giants.
There was no way anyone could have stopped customers from welcoming new products, with RuPay cards offering free accident cover to the tune of Rs 1 lakh. Don’t Visa and Mastercard ride piggyback on the booming ecommerce business in India by warming into the hearts of Amazon and Flipkart and private sector banks, the usage of whose cards at times beget customers a special discount and cashbacks?
Their beef is RuPay, along with UPI (Aadhaar-linked Unified Payments Interface) comes under the Zero-MDR (merchant discount rate) norm by the Indian government, i.e., no fees can be levied on merchants for transactions on these networks. This automatically makes credit card transactions costly. Visa, instead of turning to the US government for help, could learn to compete by slashing their MDR.
To be sure, RuPay is the market leader in terms of overall card issuances, but lags behind in credit cards (just 9.7 lakh credit cards issued from a total of 60.36 crore. The lukewarm demand for credit cards has something to do with the Indian psyche — manage with what you have. This is in sharp contrast to the US way of cruising ahead on debt where you buy now on credit and pay in the future. Small wonder Visa with its credit card leadership still dominates the Indian market with a whopping 44 percent market share of overall cards spends.
Visa might be a global giant, but it will have to think local to survive and prosper. The usurious interest rates (30 percent per annum and more) on credit cards is a positive put off for a wannabe spendthrift in India. Incidentally that is also why many thrifty Indians use credit cards more like debit cards, and do not end up paying interest. That said, credit cards do beckon those in financial extremis, and who can’t wait for loan sanctions and give credible security.