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Banks plan rival to Visa, MasterCard

Banks are setting up a domestic card payment settlement company, called India Pay,that would rival global payment systems Visa and MasterCard.

Apnaloan.com Research Bureau

10 Aug 2007

Banks are considering setting up a domestic card payment settlement company, called India Pay,that would rival global payment systems Visa and MasterCard.

At present, all card-based transactions are settled through the global payment network of Visa and MasterCard. The plan, taken up under the aegis of the Indian Banks Association (IBA), comes amid estimates that payments through cards would increase three-fold over the next five years.

In 2005-06, the total spends at point-of-sale (POS) terminals crossed Rs 55,000 crore. As many as 18 million credit cards and more than 60 million debit cards were issued in that year.

Every transaction involves payment of an interchange charge to MasterCard or Visa for settlement, which amounted to about $50 million during the year. A domestic card payment settlement company would save the outgo on commission paid to Visa and MasterCard, a senior banker said.

Depending on the cost advantage and nature of transactions, different infrastructure could be used, said bankers. For international transactions, the India Pay switch could connect to MasterCard or Visa. The gateway could also interact with another payment system like China Union Pay.

"We have had some discussion. The management committee of IBA will look at whether a commercial model can be built, as it would require investment and the current system has stabilised over the years," said a senior official.

The IBA standing committee on information technology and business process re-engineering had earlier deliberated on the pros and cons of setting up a domestic card payment system and was of the view that its benefits would outweigh the disadvantages.

"India Pay would provide national infrastructure to be used with a minimum of cost and allow a wider reach. If we look at it from the perspective of benefits, the costs would be justifiable," said Sanjay Sharma, chief technology officer, IDBI Bank.

(Courtesy: Business Standard)


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