India’s banks are considering setting up a domestic card payment
settlement system to rival the networks operated by Visa and MasterCard,
according to a Business Standard report.*
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.
Every Indian eftpos transaction currently involves payment of an
interchange charge to MasterCard or Visa for settlement, which amounted
to about $50 million during 2005-2006. A domestic card payment
settlement company would save the outlay on commission paid to Visa and
MasterCard, a senior banker told the Standard.
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 stabilized over the years,” a
senior IBA official told the paper.
Sanjay Sharma, chief technology officer, IDBI Bank believes the benefits
would outweigh the disadvantages.
“India Pay would provide national infrastructure to be used with a
minimum of cost and allow a wider reach,” he told the Business Standard.
“If we look at it from the perspective of benefits, the costs would be
justifiable.”
