Can India overthrow Visa and Mastercard?

Long before the war in Ukraine, India’s Prime Minister Narendra Modi decided that international card networks could be used as instruments of statecraft — and that he should channel the rising economic power of his country’s 1.4 billion people to resist the dominance of Visa Inc, Mastercard Inc and American Express Co. “Everyone cannot go to the border for the security of the nation,” Modi said in a 2018 speech. “If you develop a habit of using RuPay card … that will also become a medium to serve the nation.”
Like Russia’s Mir and China UnionPay Co, RuPay is a homegrown card network, promoted by the National Payments Corporation of India since 2012. New Delhi has pushed it so aggressively over the last few years that a worried Visa Inc has complained to the US government about the lack of an even playing field in India, according to Reuters. Mastercard has grumbled as well.
Meanwhile, Discover Financial Services’ Diners Club as well as Mastercard and American Express have gotten into regulatory trouble with the Reserve Bank of India over data localisation rules. The decision by global card firms to boycott Russia over its invasion of Ukraine may amplify nationalist sentiments. But will RuPay ever become a serious alternative? It may take more than patriotism to take on the entrenched payment institutions.
Modi’s unhappiness with Western networks — at least, based on what he said publicly in 2018 — was about sharing processing fees with foreigners. However, in the wake of card platforms’ suspension of Russian clients’ access to merchants overseas, the link between plastic and politics has acquired a more serious dimension: circumventing potential denial of service.
With active state patronage, RuPay has issued more than 600 million cards, giving it a 60%-plus share in India in late 2020, up from just 15% in 2017, according to the RBI. However, most of the instruments are debit cards, linked to no-frills savings accounts that the Modi government opened in large numbers for the poorer sections of society as part of its financial inclusion campaign. The 1% to 2% of the population with meaningful purchasing power isn’t quite ready to junk their Visa or Amex cards.
Winning over the credit-card customers who spent 878 billion rupees ($11 billion) with merchants in January — 50% more than debit-card users — won’t be easy.

—Bloomberg