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MasterCard has told the US government that Prime Minister Narendra Modi is using ‘nationalism’ to promote Indian payments network RuPay and that the Indian government’s ‘protectionist’ measures are hurting the interests of foreign payment companies, according to a letter accessed by news agency Reuters.
WHAT’S THE CONFLICT ABOUT?
The New York-based payment company wrote a letter to the United States Trade Representative (USTR) on 21 June that PM Modi “associated the use of RuPay cards with nationalism, claiming it serves as a ‘kind of national service’.”
WHY IS MASTERCARD EVEN WORRIED?
Since demonetisation, the Modi government has constantly pushed the ‘cashless economy’ narrative, thus presenting digital payment companies with a greenfield to explore. To put things into context, Reserve Bank of India (RBI) data shows that Indians in August recorded transactions worth $51 billion on debit and credit cards, nearly double the amount recorded in November 2016.
However, foreign payment companies got a raw deal as the beneficiaries of Modi’s flagship Jan Dhan Yojana were offered a RuPay card, not a MasterCard or Visa.
MasterCard has also expressed its displeasure over the government’s version of the fees levied by payment companies for digital transactions.
Referring to the National Payments Corporation of India (NPCI), which developed the RuPay network, the letter states that it acted both as “a quasi-regulator and a competing payment network”.
Quoting industry sources, Reuters reported at one point, RuPay levied a transaction fee which was half of that charged by MasterCard and Visa, but the US card companies reduced charges in recent months.
IS THERE A BACKGROUND TO THE CONFLICT?
Well, there is. The likes of MasterCard and Visa have been at loggerheads with RBI since in April 2018, the central bank asked all payment service providers to store payments systems data related to user transactions only within India’s national boundaries, citing protection of data.
RBI had set 15 October as the deadline for compliance.
Late last month, Mint reported MasterCard and Visa have started storing data on domestic transactions from October, even as they seek relaxation of rules on storing data on older transactions.
An Economic Times report on 31 October, quoted MasterCard Chief Executive Officer (CEO) Ajay Banga going a step further to claim data security might not even be a surety, even if they comply with the RBI norms.
“When we talk about our lack of support for data localisation, it is not caused so much by expenses. It is caused by the inefficiency of what that does to the ability to provide safety, security and analytics to India’s banks and merchants,” Banga said.
(With inputs from Reuters, Economic Times, Livemint)
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