Mastercard Faces Domestic Challenge in India

The National Payments Corporation of India (NPCI) has finalized the commercial launch of the proposed India card which would be a domestic alternative to the global payment processing firms.  MasterCard, the second largest global payment solutions company, provides a variety of services to support the credit, debit and related card payments of over 24,000 financial institutions.  Given the size of India, this could have an impact on MasterCard's international transactions growth. Its main competitors are Visa, American Express and Discover Financial.  Transaction processing, the major revenue source for MasterCard, constitutes about 32% of the $293 Trefis price estimate for MasterCard's stock.  The Reserve Bank of India (RBI) in 2009, had asked the Indian Bank Association to launch a non-profit payment solutions company to meet the requirements of domestic banks. After almost two years of planning, NPCI has finalized the name of the proposed card as Rupay, which will launch later this year. The Rupay will resemble China's Union Pay, the domestic real-time payment processing firm for Chinese banks.  RBI, in its vision paper on payment systems in India, said that the need for such a system arises from two major considerations: (1) the absence of a domestic price setter has caused the Indian banks to bear the high cost for affiliation with international card associations; and (2) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country.