UPI & RuPay: A Threat to Visa & Mastercard

Unified Payments Interface (UPI) and RuPay are two Indian payment systems that are gaining popularity and posing a threat to Visa and Mastercard, the two global payment giants.

How UPI and RuPay work

UPI is a real-time payment system that allows users to make instant payments to any other user using a mobile app linked to their bank account. RuPay is a domestic payment card network that is accepted at all merchants in India that accept card payments.

Why UPI and RuPay are a threat to Visa & Mastercard

UPI and RuPay are a threat to Visa & Mastercard for a number of reasons:

  • They are cheaper. UPI transactions are free for users, while Visa and Mastercard charge merchants a fee for every transaction. This makes UPI and RuPay more attractive to merchants, especially small merchants who operate on thin margins.
  • They are more convenient. UPI and RuPay are both mobile-based payment systems, which makes them more convenient for users to use. Visa and Mastercard cards, on the other hand, require users to carry a physical card with them.
  • They are more secure. UPI and RuPay use two-factor authentication for all transactions, which makes them more secure than Visa and Mastercard cards.
  • They are backed by the Indian government. UPI and RuPay are both backed by the Indian government, which is giving them a push over Visa and Mastercard.


How UPI and RuPay are gaining popularity

UPI and RuPay are gaining popularity due to a number of factors, including:

  • The rise of smartphones. The number of smartphone users in India is growing rapidly, and this is driving the growth of UPI and RuPay.
  • The government's push for digital payments. The Indian government is promoting digital payments as a way to reduce corruption and promote financial inclusion. This is helping to boost the adoption of UPI and RuPay.
  • The increasing number of merchants accepting UPI and RuPay. The number of merchants accepting UPI and RuPay is increasing, which is making it easier for users to use these payment systems.


Impact on Visa and Mastercard

The growing popularity of UPI and RuPay is having a negative impact on Visa and Mastercard. Their market share in India is declining, and they are losing revenue.

In 2022, UPI processed over 78 billion transactions worth over ₹126 trillion. This is a significant increase from the 46 billion transactions worth over ₹84 trillion processed in 2021.

RuPay cards also account for a growing share of the Indian card market. In 2022, RuPay cards accounted for over 65% of the debit cards issued in India.

Visa and Mastercard's response

Visa and Mastercard are responding to the threat from UPI and RuPay by offering their own mobile-based payment solutions and by reducing their fees.

Visa has launched Visa Checkout and Visa PayWave, while Mastercard has launched Masterpass and Masterpass QR. These solutions allow users to make payments using their Visa or Mastercard cards without having to carry a physical card with them.

Visa and Mastercard have also reduced their fees for merchants in India. For example, Visa has reduced its MDR for debit card transactions from 2.95% to 0.95%.

Conclusion

UPI and RuPay are a major threat to Visa and Mastercard in India. They are cheaper, more convenient, and more secure than Visa and Mastercard cards. They are also backed by the Indian government and are growing rapidly.

Visa and Mastercard are responding to the threat from UPI and RuPay by offering their own mobile-based payment solutions and by reducing their fees. However, it remains to be seen whether these measures will be enough to stop the decline in their market share.

What does this mean for consumers?

The growing popularity of UPI and RuPay is good news for consumers. It means that they have more choices when it comes to payment methods. It also means that they can expect to pay lower fees for transactions.

Consumers should also be aware that there are some potential risks associated with UPI and RuPay. For example, UPI transactions can be vulnerable to phishing attacks. Consumers should be careful about clicking on links in emails or SMS messages that claim to be from UPI.

Overall, the growing popularity of UPI and RuPay is a positive development for consumers. It means that they have more choices and can expect to pay lower fees for transactions. However, consumers should be aware of the potential risks associated with these payment systems.


Credits: Image: https://d3.harvard.edu/platform-digit/wp-content/uploads/sites/2/2020/02/Picture1.png Text: Generated with the help of Bard (https://bard.google.com/), a large language model created by Google AI. Share this post on social media if you found it helpful! Leave a comment below and let me know what you think about the blog post or correct me for any mistake. I'm always learning, and your feedback is valuable to me. © 2023 Rahul Haldar

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