India’s Rupay vs. China’s UnionPay in numbers – Scenario Building for Rupay


Rupay is an Indian domestic card scheme conceived and launched by National Payments Corporation of India (NPCI) on 26thMarch 2012. NPCI is an institution driven by RBI to support/drive all the retail payment systems in the country. NPCI was founded in 2008 under RBI with ten core promoter banks namely, State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC. The core objective was to consolidate and integrate the multiple payments systems with varying service levels into nation-wide uniform and standard business process for all retail payment systems.

NPCI launched Rupay on the lines of China’s UnionPay with an objective to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments. NPCI led by RBI launched Rupay with two objectives in minds

  1. Reduction in cost of card/e-commerce transactions: Rupay charges USD 0.03 for a customer's transaction size of USD 25.8 against Visa/Mastercard charge of USD 0.05. There is no entry fee for Rupay, where as Visa/MasterCard charge as high as USD 40,000. There is no quarterly fee for Rupay as against Visa/MasterCard’s fee of USD 16,000 – 50,000.
  2. Data Security and Privacy: Data related to transactions and customers to reside in India for Rupay, whereas Visa/Mastercard stores this data in their data centres across the globe.

Comparison of Rupay and Unionpay

China’s UnionPay was launched in 2002 and has grown exponentially to become the third largest payment network worldwide in terms of transaction values processed. This exponential growth has been fuelled by forced monopoly of UnionPay in China. It is the only network that is allowed to process Yuan-denominated card transactions in China. All Visa/Mastercard based card payments have to pay commission to UnionPay for Yuan-denominated transactions in China. Will that happen in the largest democracy in the world?

UnionPay numbers are also driven by strong adoption of Card based payment for retail purchases. In 2002 only 1-2% of retail payments were made card based as against 30-35% in 2013. UnionPay growth has been debit card driven with 2/3rd of transaction value processed being contributed by debit cards in 2011.

Rupay, following UnionPay, has issued Debit cards and expect them to be the major drivers of growth. It also has tied up with Discover to allow payments in foreign markets. Though, it is highly unlikely that RBI will follow China and make INR denominated transaction to be done mandatorily through Rupay network. LTP has considered three scenarios to forecast how Rupay will grow in the next 5 years.

Exhibit 3 (Scenarios)

Note: 1. LTP has only considered Debit and Credit cards for the analysis.

Scenario Analysis: Rupay currently holds only 0.7% Indian market in terms of cards issued. LTP built three scenarios to analyse Rupay’s growth in the next 5 years.

Scenario 1: In this case LTP has considered Rupay network marginally penetrating cooperative and rural banks supported by healthy share of Scheduled commercial banks card issuance. In such a case, Rupay could grow at 20% CAGR (current rate of card growth in India) and is estimated to issue 8 million cards by 2018. In such an eventuality, Rupay is expected to process at least USD 50 billion of transactions in 2018.

Scenario 2: In this case LTP has considered Rupay network penetrating cooperative and rural banks and driving a strong card issuance for the unbanked/no frill customers. This will supported by healthy coverage of Scheduled commercial bank. In such scenario, Rupay could issue ~ 20 million card by 2018 (45% CAGR) and would be able to capture a quarter of transaction value. In such a case, Rupay will process around USD ~120 billion of transaction in the year 2018.

Scenario 3: In this case, LTP has considered RBI following China Central bank’s policy of monopolizing the payment network for security and privacy concerns. In such a scenario Rupay is estimated to process transaction worth as high as USD 0.5 Trillion in 2018, capturing almost 90% of the transaction processing.

LTP View: LTP believes that Rupay can realistically grow at 30-40% CAGR in the next 5 years to capture nearly a quarter of India’s card payment transactions. This will be particularly aided by addition of new merchants (driven by lower costs), new banks (Growth in merchants), financial inclusion requirements and central bank’s support to keep payments and customers’ data safe within India. In worst case, Rupay will process at least USD 50 million a year by 2018. However, India following China like policy of monopolization seems highly unlikely.



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