Amidst onslaught from RuPay and UPI, Visa cuts fee on debit card payments

After losing market share to NPCI-owned Unified Payment Interface (UPI) and RuPay, global card firm Visa has decided to cut the charge it levies on domestic debit card transactions.

It will now charge the card issuing banks 15 paisa for transactions applicable under Rs 2,000 and Rs 1.5 for higher-value payments. The revised rate will be effective from July, according to Visa's spokesperson.

At present, it charges Rs 2.99 per transaction. The move is to encourage everyday digital payment usage across consumer and merchant categories. The card payment network sees it as help in assisting client initiatives towards expanding digital payment infrastructure in support of the Digital India programme.

The new rates are effective only for domestic debit card transactions.

However, Visa has increased the service fee to 0.055 per cent of the transaction amount, from 0.035 per cent.

Earlier in February, Visa and Mastercard reportedly lost market share to UPI transactions that reached almost half the value of debit and credit cards swiped at stores.

According to industry estimates, Visa has more than 40 per cent market share in India in terms of the number of card transactions on its network. Debit cards account for 96 per cent of the cards in use in India while credit cards account for 51 per cent, outlined an ET report.

Rising competition from local players like Rupay is said to be the prime reason behind Visa’s decision.

The National Payments Corp of India-run RuPay charges 90 paise per debit card transaction. Among Rupay major advantages, its banks do not require to pay an entry fee or a quarterly fee to join the network.

Besides, RuPay card usage at e-commerce websites shows a 137 per cent jump to reach 208 million transactions. The figure was 87.5 million in 2017. In terms of the value of payments, the transactions stood at Rs 16,600 crore against Rs 5,934 crore in 2017.

Now, Rupay has also started offering credit cards.

Industry experts also think that RuPay has been showing strong adoption among the masses especially with payments slowly going digital in rural India.

RuPay's cost-effectiveness is considered to be a differentiator in comparison to other international card networks. This move by Visa seems to be a calculated shot to tap into smaller merchant base.

Besides mid-sized merchants, small traders have been showing substantial appetite towards PoS and digital payment channels. With card companies including RuPay slashing commission charge, SMEs are ready to accept payments via card, wallets and UPI-based payment options.

Going forward, the RuPay card penetration and UPI volume, as well as value, are expected to grow exponentially with the mass rollout of WhatsApp UPI and upcoming UPI 2.0. It would be interesting to observe how Visa and Mastercard will be responding to the dual onslaught by NPCI.