Monday, August 4, 2014


Ever since the new "Payment and Clearing" system called RuPay was introduced, there have many articles in news papers & magazines about this system. Some of us know what this RuPay system is but most of us might not know. So, if you are one among the majority population who do not know anything about this RuPay system, then look no further. The purpose of this article is to help you understand the RuPay system as well as the benefits it would have on our Indian Economy...

So, What is RuPay System?

RuPay is an Indian domestic card scheme conceived and launched by the National Payments Corporation of India (NPCI). RuPay facilitates electronic payment at all Indian banks and financial institutions, and competes with systems like MasterCard and Visa in India. The main objective of the RuPay payment network project is to reduce the overall transaction cost and develop products appropriate for financial inclusion.

Why RuPay was Introduced?

Though Visa and MasterCard were able to facilitate credit & debit card transactions across banks without issues, India did not have a payments clearing system ingenious to our country. The RBI has been pushing the NPCI to introduce such a system and RuPay is the result of that.  

RuPay is 7th payment network in the world after Visa, MasterCard, American Express, Discover, Diners Club, and JCB. 

Is RuPay New?

Actually No. The RuPay system was launched on 26 March 2012 but for some strange reason, banks from India have been reluctant to endorse it. On 8 May 2014, RuPay has been dedicated to India by President of India, Mr. Pranab Mukherjee which resulted in a surge of news about RuPay in all papers and finance websites. 

Is RuPay Just a Domestic System?

Again, No.  NPCI has a strategic partnership with Discover Financial Services (DFS), enabling the acceptance of RuPay Global Cards on Discover’s global payment network outside of India. 

Is RuPay Widely Accepted?

Of Course, Yes. In fact, RuPay cards are accepted at all automated teller machines (ATMs) across India under the National Financial Switch. With NPCI's agreement with DFS, RuPay cards are accepted on the international Discover network. 

As of now there are approximately 1.5 lakh ATMs and about 9 lakh Point of Sale (PoS) machines in India that come under this RuPay payment system. In addition to these ATM's and PoS Terminals, RuPay cards are also accepted online on over 10,000 e-commerce websites. 

The card's ATM PIN is sufficient to authorize the RuPay transaction. 

The Biggest Benefit of the RuPay System - Lower Fees

RuPay is entering as a direct competition with plastic issued through Visa and MasterCard, and its charges are drastically lower compared with Visa or MasterCard. Banks have to pay less to the payment gateway provider. Since the transaction processing will happen domestically, it would lead to lower cost of clearing and settlement for each transaction. This will make the transaction cost affordable and will drive usage of cards in the industry.  

According to RBI, more than 500 crores was paid as transaction fee to Visa and MasterCard last year by Banks from India. On top of this, enrolling with RuPay is Free for our Banks. Enrolling with Visa or MasterCard is very costly. It usually comes with a huge sign-up fee as well as quarterly maintenance fee which drain "Banks" resources heavily. 

A switchover to RuPay Card, the Indian version of Visa or MasterCard, can help Indian banks save as much Rs 500 crore annually in transaction fees. For all the stakeholders this is excellent news because NPCI charges just 90 paise as the fee per transaction - Of which 60 paise goes from the merchant and 30 paise from the card issuing bank. Compare this to the Average of about Rs. 3-4 per transaction that Visa or MasterCard charge.

Why Isnt RuPay Popular?

Though the RuPay card system was introduced long back, the system effectively did not get kicked off. In fact, most people did not even know such a system existed. Anyways, there are a few reasons why RuPay isnt becoming as popular as it should be..

1. Reluctance from Banks - Federal Bank and Public Sector (Government) Banks are the only ones that are currently issuing RuPay cards. Even Govt. Banks have started issuing in full-swing only after a nudge by the new BJP Government. The primary reason for this reluctance seems to be the long-term partnerships our banks have already engaged with international payment systems like Visa or MasterCard. As mentioned in the previous paragraph, the fees to enrol with MasterCard or Visa is very high and banks usually save on this fee by entering into long-term commitments. Cancelling this commitment would mean heavy penalties and banks probably dont want this to happen. 

My Take on this: I feel this is not a valid excuse. Banks are being short-sighted at their near-term penalties. In the long run RuPay will help them save hundreds of crores each year on fees to Visa or MasterCard. If I were to pay a few thousand rupees as penalty this year which will help me save many thousands each year for many more years to come, I would do it. But, for some strange reason, our banks are reluctant...

2. Reluctance from Citizens - For some wierd reason, our people feel that an International Brand is better than the local one. Most countries across the globe are very proud of their local payment systems and endorse it. But, we Indias still need International Acceptance in our domestic market. 

My Take on this: Unless you are someone who travels abroad frequently, a RuPay card could help your bank and your country save a lot of money that gets paid out to foreign clearing houses. Even if you are one, get yourself a RuPay card for your local transactions and have another Visa/MasterCard for your abroad trips. 

Some Last Words: 

I Personally feel that this RuPay payment system is an excellent idea and will help our nation develop as a super power. If we switching to RuPay card will help save India 500 crores worth of money being paid out to foreign entities like Visa or MasterCard, I would do it. In fact, this will also help stabilize the Indian Rupee. 

Though all government banks are issuing RuPay cards now, private banks are still not endorsing this system. If the customer insists that he/she wants the RuPay card, do you think the bank has a choice? They would happily oblige your request and give you the RuPay card. When I come back to India, I am going to switch over to RuPay. What about you? 


  1. but it isn't supporting for paytm,and few online stores :(

    1. Yes anonymous. Slowly more and more online stores will start accepting RuPay. The government and RBI is strongly pushing for this.

  2. Thanks, this is very useful info...

  3. Hi Anand, do u hav any idea about the technology used in this..

    Also, Kindly reply if u know about network and Technologies used in ATM


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