During my recent trip to Australia, I came across many shops which had signs of, We accept UnionPay. I was intrigued by what is UnionPay. Shops accept Master and Visa everywhere in the world. Relatively in Asia, American Express is not so common in spite of their awesome track record in USA. Between the three of them, they dominate the payment mechanism market.
I let things by till I came back to India and met one of my banker friends and we were discussing payment mechanism and ATM potential in India. He enlightened me on what UnionPay was all about.
UnionPay is the payment mechanism developed by the Chinese Government. Its origins date back 10-15 years ago, when the Chinese government found that Visa and Master Card were very expensive for pushing electronic payment mechanisms like ATM and Debit card all over China. To counter such high charges by Master and Visa, the Chinese Government launched their own electronic payment mechanism with the support of the People’s Bank of China and other Chinese Banks. Apparently it is a version II of The Golden Card Project which was the first attempt of China’s various card and interbank networks in the early 90’s. In recent times, it has gained momentum as more and more Chinese travel abroad and the Chinese economic might in the overall world is increasing. Now Chinese UnionPay cards are used all over the world.
I was also wondering if India had similar initiatives and was pleasantly surprised to know about RuPay. I was completely unaware of this and a good part of my weekend was spent surfing on this topic only to realise that the project is close to completion and is set to roll out across the country soon. And this is also the Indian Government’s answer to the high charges associated with transactions through Master, Visa and Amex when it comes to electronic payments.
The UID or Aadhaar project is meant to give a unique identification to Indians and use the same to transfer cash benefits directly to reach an individual. You can have a smart card but you need a payment mechanism to load the smart card to enable the end-user to actually go and use it in the ATM. This calls for a robust electronic backbone in which this card can be loaded and money can be withdrawn from the ATM or swiped for any money transaction.
A set of extremely smart people under the auspices of RBI are working on this and hopefully before the next decade, during our visits abroad, we will get to see the ‘We accept RuPay’ sign. RuPay is an Indian domestic card payment network set up by the Nations Payment Corporation of India, which is a project conceived by the Indian Banks Association and the RBI. The word and logo RuPay indicate the coming together of ‘Rupee’ and ‘Payment.’
The advantage of having RuPay is that the overall transaction cost for banks will reduce and they will compete with the likes of Visa and Master. This will also go a long way in helping financial inclusion. The other advantage is that they will allow Indians, who do not fulfill eligibility criteria of Visa and Master to get credit cards. Importantly, this will be a useful ‘tracker’ of sorts for financial activity at a time when the economy moves from cash to cashless.