NEPALPAY or RuPay; Where is our Concern Headed for Unified Payments?

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NCHL

The RuPay card, having more than 60% coverage in the Indian cards market in 2020, has finally launched in Nepal. PM Sher Bahadur Deuba and Indian PM Narendra Modi jointly launched RuPay Card in Nepal today (April 2, 2022), on Deuba’s three-day visit to India after being the Prime Minister of Nepal in July 2021.

NepalPay or Rupay
Two Prime Ministers Jointly Launching India’s RuPay Card in Nepal

Know About RuPay Card

RuPay card is a digital payment product of the National Payments Corporation of India, which is promoted by the Reserve Bank of India (RBI) and Indian BFIs together.

NPCI launched RuPay Card in 2012 with a vision to unify the payments with the lowest transaction fees to both merchants and users. RuPay cardholders can use the service for ATM withdrawals, online transactions, and card payments. By November 2020, more than 600 million RuPay Cards were already launched by 1,158 banks in India. The majority of them were debit cards.

The Indian Government widely promoted RuPay Cards so as to give competition to the existing card companies like Visa, MasterCard

With its lower fees and full support from the government including the RBI itself, RuPay Card rose into acceptance from the people as the number of its customers got increased. The major reason was that a large number of those newly issued cards from 2017 accounted for the bank accounts opened under the Pradhan Mantri Jan-Dhan Yojana (PMJDY), which was launched by the Indian Prime Minister Narendra Modi.

While Visa and MasterCards mostly focus on high-value transactions, RuPay Card focused on more retail payments, which was more popular in the suburbs of India because of its apparent social-welfare motive.

While the RBI reports revealed a significant increase in the acceptability of RuPay Cards, the private sector players in the payment industry in India claimed it to have low acceptance despite the low fees.

Since RuPay Card is a product promoted by the Indian Government, it did not support the payment to the subscriptions of Netflix, Paypal, Google, Youtube, etc. RBI scrapped the feature because it felt the technology could be misused by unregulated operators to widen their credit network using pyramid schemes and chit funds. On the other hand, payment systems like Paytm, Phonepe, etc support this payment.

Why is RuPay Card being introduced to Nepal?

Nepal is the fourth country to launch RuPay after Bhutan, Singapore, and UAE. Recently, it has also become the first country to accept the UPI system for cross-border payments between India and Nepal.

The implementation of the RuPay card in Nepal will enable visitors and tourists from India to access ATMs and Point of Sale (PoS) terminals across Nepal.

The two prime ministers jointly launched RuPay Card in Nepal, signing a four-pact agreement to expand cooperation in areas of railways, finance, and energy while adding to work on further cooperation in a wide range of areas. Moreover, they inaugurated the only cross-border railway link between India and Nepal.

Regarding this announcement, India’s foreign Secretary Harsh Vardhan Shringla says,

The launch of RuPay in Nepal is a significant move to enhance financial linkages between the two countries.”

Similarly, Indian Prime Minister Narendra Modi said,

The introduction of RuPay card in Nepal will add a new chapter to our financial connectivity. Other projects like Nepal Police Academy, Integrated Check Post in Nepalganj, Ramayana Circuit, etc. will also bring the two countries closer“.

PM Sher Bahadur Deuba said, “Nepal’s relationship with India is highly important.”

In the name of bilateral collaboration, is this posing a threat to our home-grown payment systems? Some flipside of RuPay Card’s launch in Nepal

Well, it is a commendable step taken by both Governments to launch the RuPay Card in Nepal too in order to ease the RuPay Cardholders. However, while promoting bilateral agreements like such, the concern is- What is our Government doing for the promotion of our own NepalPay card which is launching soon?

The Indian Government played a protectionary role for RuPay Card by restricting Master Card for the new issuance inside India in 2020, claiming that the global card companies like Visa and MasterCard had high transaction costs which took away Indian money under settlement costs.

While NCHL is about to issue its own card for Nepal as NepalPay Card, does the launch of the RuPay Card pose threat to this infant home-grown card? The answer is- Yes.

With the already existing global players like Visa and Mastercard having invaded the cards market and completely engulfing the market share of Nepal’s SCT cards, the new entrant in the Nepalese cards market like RuPay card can certainly emit some competition for the local payment eco-system.

Even more, it can also pose the threat to the implementation of the National Payment Switch, which is one of the major projects under the Digital Nepal Framework. NCHL has already launched NepalPay QR and NCHL’s CEO Neelesh Man Singh Pradhan had also hinted about NepalPay Card in the latest conversation with TechSathi.

In this scenario, instead of promoting and supporting the newly developed NepalPay card, Nepal Government is making ties to promote its neighbor country’s indigenous card.

It might benefit the RuPay Cardholders coming to Nepal because of its lower transaction costs. However, the settlement costs will be swiped off in a huge quantity to the foreign market from our Nepali banks which render these services.

Let me give you an example. The banks charge a minimum of Rs 20 on cross-ATMs usage. Most of the ATM cards in Nepal are supported by Visa. This cross-ATM charge that we pay to the bank goes to Visa. You can do some maths on your own counting on 7.24 million-plus ATM cardholders in Nepal and estimating how much money flows outside of Nepal.

The growing competition between RuPay and Visa in the Indian market led Visa to reduce its transaction costs to 0.15 Indian Rupees for transactions under Rs 2,000 and Rs 1.5 for higher-value payments, from a uniform rate of Rs 2.99 per transaction on July 1, 2018.

With these big players having proper infrastructures and resources to sustain decreasing transaction costs, along with an increasing customer base, how will be the effect of their presence in Nepal is yet to be felt.

While it is all up to the customers to choose the payment options according to the benefits they get, we can just wait and watch how these card players will get into the payment ecosystem and fight for their market share.

What do you think of the launch of the RuPay Card in Nepal? Will it support the digital payment ecosystem in Nepal or will backfire on the existing cards? Please feel free to drop down your comments.

Also read: NEPALPAY QR Announced as an Implementing Infrastructure of NepalQR

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Hi, I am a postgraduate student of Economics, stock market enthusiast, an occasional storyteller and a habitual reader.

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