India is leading a digital payments revolution that’s challenging the global dominance of traditional payment giants such as Visa and Mastercard.
Honing in on Homegrown Networks
Moving away from Western payment networks, India has been developing alternative digital payment systems. Having achieved significant success with its groundbreaking Unified Payments Interface (UPI), the nation now enables consumers and businesses to facilitate instant transactions by directly linking bank accounts, sidelining international card networks.
UPI’s Impactful Growth
The nine-year-old UPI platform now handles a whopping 71% of all transactions carried out in India, which represents about 36% of all consumer expenditure, based on a Bernstein report. This has led to an explosive growth of the local credit card market via India’s own network, RuPay.
RuPay’s Rapid Rise
In 2022, RuPay underwent a transformative shift, becoming the exclusive network for processing credit card transactions through UPI. Its market share is likely higher than reported, considering the exclusion of certain types of transactions from the available data.
Strategies for Driving Adoption
To foster greater RuPay adoption, the Indian government has employed a strategic model which combines low merchant fees and consumer freedom to select their preferred card network – a blend appealing to small businesses. Moreover, in a bid to level the playing field, banks have been instructed to offer RuPay cardholders equivalent rewards to those of other networks.
These tactics seem to be paying off: RuPay accounted for a significant 50% of all new credit cards issued in India in June 2024.
The Big Picture
The local government’s bold steps and innovative strategies have led global payment leaders Visa and Mastercard to fundamentally rethink their approach in India.
However, with UPI’s exponential growth threatening the credit card industry’s market share—decreasing from 43% in 2018 to 21% in 2024—these adjustments may be too little, too late for the card giants.
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