How India's nationalistic drive affecting American companies Visa, Mastercard in the country



RuPay is an Indian domestic card scheme conceived and launched by the National Payments Corporation of India (NPCI) on 26 March 2012. It was created to fulfill the Reserve Bank of India's (RBI) desire to have a domestic, open loop, and multilateral system of payments in India. Before RuPay, Mastercard and Visa used to be the biggest payments service in India unilaterally dominating the entire economy. However, ever since the launch of the RuPay cards, Visa and Mastercard have been struck with some major obstruction. Their share has rapidly fallen in the country. Now about half of India's 1 billion debit and credit cards go through RuPay alone and part of it is because of India's nationalistic drive.

Although Visa has not shared any concern, at least in public, Mastercard has been vocal about it. Recently a report from Reuters has unveiled that Mastercard has lodged a protest in the US against the move. They have claimed that India's leader PM Narendra Modi has multiple times sold RuPay under the banner of nationalism. He had multiple times claimed that using RuPay will add to the national service of the country.

"Increasing rhetoric from the prime minister and government mandates on promotion and preference for RuPay... continues to create market access issues for U.S. payments technology companies,"
 One of the statements from Mastercard's letter to the US reads

While Mastercard has said that it supports India's digital drive and is fully committed to the country, they also stated that a series of protectionist measures are being placed by the Indian government that deters global companies.

India's addiction to foreign technology is real in all front. India is much dependent on foreign technology even on very key aspects in the Indian defense. The same has crept into India's infrastructural, financial, social and to an extent, even the political spectrum of the country. When Narendra Modi rose to power he have multiple times stated his willingness to get India rid of foreign technology in key areas. However, a lot of the promises have not really met with sufficient results, especially in the defense sector. Instead, he moved forward with the traditional Indian style of diversifying her technology deals so that strategic autonomy is not lost to a single country.

This remains a shade in the bandwagon of promises that NaMo have made while targeting to be the PM of the country. His promotion of India made goods under the banner of "Make in India" have not yield sufficient results because of the amount of investment that was required in the infrastructure amount to the entirety of the country's GDP.

RuPay is a story of success among this. RuPay was launched by the previous government but NaMo has been tireless in promoting it. Narendra Modi has claimed that using RuPay, the transaction fees will help develop the country's roads, build more educational infrastructure and improve the already existing one. His promotion of RuPay does have painted it as a national service. It cannot be arguably denied.

This has lead RuPay to grow rapidly during his government's time, especially after the digital India push. RuPay have gone from having zero shares in 2012 to having half of India's transaction industry today. Much of the growth took place under the digital India drive. When note ban came into effect, the month preceding have seen double the amount of online transaction worthing to about 51 billion dollars.

Not only Indian but a lot of foreign companies were also given a push into the online transaction industry. However, it is safe to say that Indian companies were given an edge, including the government-owned ones.

An example would be RuPay itself. Due to NaMo's financial inclusion scheme, all Indians opening a bank account will at first receive a RuPay card and not Visa or a Mastercard. Given that most Indians don't care what is written on their card and neither do have much knowledge regarding the transaction fees attached, they would just end up using it anyways regardless of knowledge about other options.

RuPay have been marketed as the cheapest card in India which is arguably wrong because Mastercard and Visa charge lower than RuPay and sometimes only half the amount. Although, these changes in pricing policy by Mastercard or Visa is instilled by the fear of rise of RuPay.

Despite all this though, nationalism has still clearly emerged as the victor.

"everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation".
Modi has once said. He also said that foreign transaction companies take their money abroad and seemingly Mastercard have countered saying that only 15-20% of its transaction fees go abroad and rest of it stays inside the Indian economy.

Modi is also known to promote homegrown digital wallets like PayTM, PhonePe and BHIM app instead of Google Tez (now Google Pay) and other foreign-based digital wallets which did put them at a strategic disadvantage.

The real question remains whether Modi was right at doing this, trying to achieve strategic autonomy is good for the country or have Modi disturbed the ecosystem for digital businesses in India by engaging in unfair practices.