As digital funds morph into strategic property, India is providing a template for different nations searching for to scale back dependence on Western fee networks.
Regulators around the globe are notching up scrutiny on Visa and Mastercard over the charges they cost retailers, however India has chosen a special path: Creating rival fee networks which might be more and more sidelining worldwide card networks.
India’s technique builds on the Unified Funds Interface, generally known as UPI, a nine-year-old system that lets customers and retailers bypass conventional card networks by connecting financial institution accounts immediately by means of QR codes and telephone numbers.
The UPI community now processes greater than 13 billion real-time transactions month-to-month — that’s about 71% of all transactions on the earth’s most populous nation — and accounts for 36% of all shopper spending within the nation, in line with an evaluation by Bernstein.
UPI’s dramatic success hasn’t gone unnoticed. The native authorities has been leveraging the system’s success to reshape its bank card market with RuPay, a homegrown card community. RuPay enjoys a vital benefit: It’s the one fee system allowed to course of bank card transactions by means of UPI.
This exclusivity, granted solely in 2022, is proving transformative: RuPay processed ₹638 billion ($7.43 billion) in UPI bank card transactions within the first seven months of fiscal 12 months 2025, practically double from a 12 months earlier.
These transactions now account for 28% of all bank card gross sales in India, up from 10% final 12 months, in line with Bernstein. (RuPay’s bank card figures don’t embody swipes at service provider retailers and another transactions, as that knowledge isn’t obtainable, so its market share is probably going even larger.)
And final 12 months, authorities started working aggressively to additional popularize the adoption of RuPay bank cards, a push that many banks initially resisted, citing considerations about dropping interchange charges.
The technique includes cautious calibration of charges. RuPay bank cards on UPI solely cost retailers for transactions price greater than ₹2,000 ($23.3). This construction has explicit enchantment for small companies which have traditionally resisted bank cards to keep away from paying service provider charges, for the reason that common UPI credit score transaction presently runs decrease than ₹1,000.
What’s extra, India’s central financial institution final 12 months ordered lenders to let customers select their card community when taking or renewing bank cards, prohibiting unique agreements with international networks. In August, the Nationwide Funds Company of India (NPCI), which oversees each UPI and RuPay, directed banks to make sure RuPay cardholders obtain the identical rewards as different networks.
The push appears to be working: RuPay accounted for half of all new bank cards issued in India in June 2024, in line with a current disclosure by a lawmaker in parliament.
“Assuming UPI linkage stays unique for RuPay playing cards, RuPay is more likely to emerge because the dominant community for bank cards,” a Bernstein report on Friday learn.
“As soon as the QR code primarily based funds turn into dominant for credit score primarily based funds too, credit score accounts of banks might be immediately linked to the UPI community bypassing the playing cards,” the analysis agency wrote.
Dealing with such a robust push by the native authorities and altering shopper conduct, fee giants Visa and Mastercard have been compelled to vary how they function in India. They’ve partnered with fintechs in current months to increase card help to UPI-powered service provider terminals, utilized by greater than 10 million shopkeepers in India. It’s fairly the spectacle: The identical card networks didn’t discover it possible to work with such small retailers only a couple years in the past.
However these efforts may be too little, too late. The stratospheric development of UPI is blowing away the bank card trade at massive — bank card’s market share in India’s digital funds fell to 21% in 2024 from 43% in 2018. For Visa and MasterCard, the risk is actual, and the battle is about to go uphill in the event that they don’t discover a option to flip this chance into a bonus.
