- RuPay – India’s challenger to Visa/MasterCard - India’s cards industry – the story to date - The enormous un-banked opportunity in India - RuPay – so what’s new? - Can RuPay emulate China UnionPay? - The long hard road to get it right

1. Will RuPay pay off?
________________
An Overview of Reserve
Bank of India’s payment
gambit

2. On the Agenda
 Introduction
 RuPay – India’s challenger to Visa/MasterCard
 India’s cards industry – the story to date
 The enormous un-banked opportunity in India
 RuPay – so what’s new?
 Can RuPay emulate China UnionPay?
 The long hard road to get it right
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3. RuPay – a new beginning
 RBI took up the challenge and set up the Board for Settlement and
Payments Systems in 2005.
 Vision of an umbrella payment institution covering all retail payments
in India.
 NPCI (National Payments Corporation of India) set up in Dec 2008 to
launch and operate RuPay as an independent payments switch.
 Heavyweight promoters, including ten leading banks in India on the
Board – SBI, Canara Bank, Citibank, HSBC, etc.
 Leading Issuers and Acquirers join RuPay.
 Envisaged as the National Payments switch that will process all
forms of retail payments (POS, ATM, Internet, Mobile and Prepaid).
 Seen as an end-to-end domestic payments switch along the lines of
China UnionPay.
After slow progress, RBI released another Payment System Vision
Document for 2012 – 2015 in July 2012!
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4. India’s Card Industry – an underweight
 Credit Card Industry lost “sizzle” in the downturn:
• Debit rules the day and also mostly on ATM – 94% on debit
• Rs. 755 Billion of usage on cards in India in 2010 – less than 4% of
consumer spend
• Less than 18 million credit card users – down from the peak of 26
million in 2007
• Revolve rates less than 30% of receivables.
 The cards industry grew at a CAGR of 28% in the last 4 years .
 Debit garnering the largest share of growth – with a CAGR of over 28%
growth in market share.
 Weak growth in Merchant Acquiring – one of the lowest POS penetration
rates in the world with 497 terminals per million population.
 Only 3 banks in Acquiring space.
 Cash is still King!
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5. Massive Un-banked opportunity
 RBI says that more than 145 million rural households have no access to
banking.
 The World Bank estimates that less than 40% of India’s adults have a
bank account.
 But India has more than a billion mobile phones.
 Gap mainly in rural India – despite the RBI designating rural areas as a
‘priority sector’ with lending targets.
 Government disbursements (such as subsidies or social benefits) made
predominantly in cash through agencies (Rs. 2.93 trillion). If disbursed
electronically it would equal 4.13 billion transactions per annum.
 Ample faith in banking system due to public sector banks – not
translated into electronic payments usage.
 Poor adoption of online payments – partly due to low internet
penetration.
Huge opportunity to use RuPay and bring the ‘lower half of the pyramid’
into the banking fold
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6. RuPay – can it lift the payments industry?
 RuPay is expected to cover all form of payments, including debit, credit,
prepaid, ACH, mobile, online and multiple variations – help in the push
towards a less-cash dependent society in India.
 Mission statement: to ensure a payment infrastructure that is safe,
efficient, interoperable, authorised, accessible, inclusive and compliant
with international standards.
 Puts a lot of emphasis on ‘affordability’ – in line with the global regulation
of interchange rates.
 RBI released a Circular on Merchant Discount rates in July 2012 –
capping MDR at 0.75% up to Rs. 2000 ($36) and 1% for transaction
amounts over Rs. 2000.
 RuPay seeks to integrate the myriad number of switches and payment
systems operating in India.
 Build capacity for the future and setting standards on interoperability and
acceptance across multiple channels.
RuPay is the only route to a universal Next-Gen payment infrastructure
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7. RuPay- how does it stack up?
 RuPay still at the starting block when compared to China UnionPay
(CUP) or even the Brazilian domestic switch.
 CUP has more than a billion cards on its network – 200 million of them
are credit cards.
 Lack of a reliable citizen ID infrastructure in India is a huge drawback.
The Aadhar – UID initiative – is yet to take off with the banks still yet to
accept it as identity proof.
 Roadmap still not clear – key issues like the re-issue of cards and
integration with all the payment networks among the top show stoppers.
 Little enthusiasm among banks to invest in a migration.
 Low transaction volumes killing the business case of mass adoption.
 Absence of consumer protection laws further hampering growth of
RuPay.
Despite the huge challenges, RuPay still remains the only viable option
for ‘electronification’ of Indian payments
Quatrro Confidential 7 www.Quatrro.com

8. How should RuPay make it work?
 To be a success, RuPay has to take a different approach:
• Use mobile technology and internet channels to supplement its
‘personal’ connect ion with consumers
• Use the vast reach of ‘branch’ infrastructure of public sector banks to
maximize adoption
• Be the harbinger of adoption of latest technology and provide a
‘stimulus’ to growth
• Centralised approach with standardisation of services
• Make it easy for consumers to convert current cash-based products
and services into electronic and mobile based products
• Integrate all clearing houses and payment settlement channels
• Run RuPay as an independent technology company with a profit
focus.
Adopt a unique tailored business model – based on latest technology
and sound risk management principles
Quatrro Confidential 8 www.Quatrro.com

9. Questions?
Thank You!
Sriram Natarajan
www.quatrro.com
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