RuPay is the brand of domestic card scheme floated by National Payments Corporation of India (NPCI). RuPay is a portmanteau word formed by the combination of Rupee and Payment and it also sounds very similar to hindi pronunciation of Rupees. Currently, all the card payments are routed through Visa or Mastercard which are world leaders in this area and these transactions are processed outside the country. After launching RuPay, the same process will be replaced by processing within the country. In simple words, Rupay is a domestic alternative to the global real time payment firms like Mastercard and Visa. RuPay is expected to be used by all commercial banks after March 2012.
What exactly is happening now?
As there is no domestic card, banks do not have an option but to tie up with Visa or MasterCard for connectivity between cardholders, merchants and issuing banks across the globe. Every transaction done using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard, which are based outside the country. All these transactions involve some charges which goes into the pockets of Visa and Mastercard for providing these services. On an average, banks pay around Rs 300 crore every year to Visa and MasterCard for processing all debit and credit card payments.
How Rupay works?
The Rupay initiative imposes the setting up of a network switch, which acts as a payment gateway that connects all the ATMs and points-of-sale terminals. The domestic system will eventually displace payment settlement providers like MasterCard and Visa.
To support financial inclusion, NPCI is offering Aadhar-enabled Rupay cards to public sector banks for their no-frill account holders. NPCI is also in talks with state owned lenders to issue cards to regional rural banks (RRBs). Using an Aadhar-enabled RuPay card, a customer can withdraw money from both, normal and micro ATMs, with the help of biometric technology. So far, NPCI has offered such cards to Bank of India, Corporation Bank and Union Bank of India.
Benefits of RuPay
- Rupay will reduce the cost for both banks and customers.
- 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.
We hope banks will pass on these benefits to the end customers also in the form of better offers for using the credit/ debit card.