The JanDhan Yojana recently launched by the Modi Government has created an unexpected shakeup in the card markets at least in the Indian geographical boundaries. Under the scheme which is mainly intended to bring a large population of low income Government scheme beneficiaries into the Banking network, around 5 crore new Bank accounts are reported to have already been opened in the last month or so.
All these account holders will be provided with a “RuPay” debit card by the participating Banks. These cards will be cleared through the payment gateway created by the National Payment Corporation of India (www.npci.org). Promoted by a consortium of Indian Banks with the blessings of RBI, will be issued by most of the Indian Banks and could grow in numbers in the coming days.
Rupay will approximately charge Rs 15 per card as processing fee to a single bank against Rs 25 of the other providers, a 40% reduction in service cost for Rupay compared with other providers. Hence it is expected that Rupay may reduce the card processing charges incurred by the Banks had they used VISA?Master debit cards for the same purpose.
According to one estimate, about 2.5 million new cards will be issued each month in the near future under the JanDhan yojana itself. These cards will be associated with an overdraft of Rs 5000/- and accident insurance benefits. In view of the huge numbers involved there is a speculation that the RuPay cards may give tough competition to Visa/Master cards.
However, it is expected that RuPay cards will be initially used by the beneficiaries mainly to draw money out of ATMs. Gradually it may be used as a direct payment instrument just like other credit/debit cards at the merchant establishments. Most such establishments could be in the network used by the intended beneficiaries of Government schemes such as stores selling farm inputs in villages etc.
It should however be recognized that any business that starts with such a huge business foundation under the patronage of the Government has the potential to challenge the established players.
However the card usage at the merchant level is unlikely to grow at the same pace as the issue since there is lot of marketing efforts and logistics involved in promoting such a card usage by merchant establishments which NPCI may not be capable of.
Hence the RuPay Cards represent a challenge typical to India where there could be a huge potential in a public sector venture but which does not get converted into a profitable business model. The examples of the Railways, BSNL, etc are similar cases to take note of.
Mr Modi has however been credited with the ability to turn Public sector potential into commercial successes and RuPay Cards present one such opportunity.
It is possible that “RuPay” as a brand if not properly handled would be considered a “Low Income Group” brand and be a drag in commercial terms. Hence ensuring that a proper brand image is built around “RuPay” if it has to be a success in a commercially lucrative market”.
I wish NPCI recognizes the great potential of RuPay Cards to be a challenger for Visa/Masters and develops a suitable strategy to harness the brand to be a real challenge to Visa/Masters.
This would require NPCI to promote the RuPay cards for use by general public other than Government scheme beneficiaries. In this context the “RuPay” Payment gateway service has to challenge the Visa/masters rather than the cards themselves.
NPCI should therefore promote RuPay payment gateway separately. It can also allow issue of RuPay premium cards for the general public.
Probably NPCI needs professional planning in this direction to harness “RuPay” as a global brand. A good public private partnership would be essential for this purpose.
Also see article in letstalkpayments.com
Also see article in flame.org.in