Indian rival in works to get swipe at Visa, MasterCard

Visa and MasterCard, the American giants that play a role nine out of ten times when anyone uses a credit card in the world, will face an unusual rival in India.

IndiaPay, a new state-backed payment processing platform, will be up and running within the next two years. Once it goes onstream, the IndiaPay card will not only dilute the dominance of Visa and MasterCard in the payment processing space, but also bring down transaction charges for banks.

At present, close to four crore plastic cards (credit and debit cards put together) are in circulation in the country, with the majority of them being serviced by the two entities. IndiaPay, being developed with Reserve Bank of India?s active support, will be India?s first indigenously developed card payment service provider.

Global payment technology firms like MasterCard and its bigger rival Visa process the payments between the merchant?s and the customer?s bank. In India, the platform is being developed by the National Payments Corporation of India (NPCI) ? the agency entrusted with the task of steering the project by the central bank.

?The NPCI has indicated that the system will be ready in 18-24 months,? said G Padmanabhan, RBI chief general manager (department of payment & settlement and systems) at a conference here on Friday.

Every time card holders use credit or debit cards at ATMs, point-of-sale terminals or for making online payments, banks pay have to pay fees to Visa and MasterCard for facilitating the processing of such transactions.

Since plastic money may gain currency as more and more Indians go for cashless transactions, an alternative payment infrastructure provider quoting significantly lower charges and backed by the banking regulator will be welcomed by the banking industry.

Countries like Malaysia and China have put in place their domestic payment processing platforms. While the former established Malaysian Electronic Payment System (MEPS) in 1997, the latter came up with China UnionPay (CUP) in March 2002.

The NPCI is promoted by major Indian banks including State Bank of India, Punjab National Bank, ICICI Bank, HDFC Bank as well as foreign banks like Citibank and HSBC.

The idea was born after the central bank released a vision document in 2005 containing a proposal to set up an umbrella institution for all retail payment systems in the country. Currently, the organisation is headed by AP Hota, chief general manager with the RBI.

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