The Fear Of Missing Out or FOMO possibly best describes the American card network behemoths Visa and MasterCard’s position in India. The two networks are attempting to bring a competitor to Unified Payments Interface (UPI). UPI is a mode of payment that completely removes the need for networks like MasterCard and Visa. It is also currently the fastest payment system, surging ahead month-on-month. In FY18, UPI recorded nearly a billion transactions. The Ken has learnt that both the card companies are in talks with Google and WhatsApp to integrate a card-based peer-to-peer payment system. This will be an alternative to the UPI-based payments Google Tez and WhatsApp support, as confirmed by four sources associated with the development.

The two companies did not respond to a detailed email with questions. Google in an emailed response said: “We have always maintained that Tez will let people pay with a wide range of payment options including credit cards. We have nothing further to share at this point in time.”

It’s ironic that the networks have to play catch-up now. Digital payments was first enabled decades ago by these two companies. And it was business as usual for the networks in India until demonetisation sped things along for them.

In 20 years, from 1996 to 2016, the networks, along with banks, had issued about 600 million debit cards. But less than 10% were active and used for payments. So was the case with credit cards, with only 40% being active, according to a 2016 Cost of Cash report by Visa. For instance, for Visa, which has a 45% share of the cards, only about 5% of them were active till 2016. And in all these years, only about 0.5% of its card base was incrementally using cards to make purchases. But in the weeks following demonetisation, when 86% of cash was sucked out of the system, card activation suddenly jumped to 14% for Visa and now it has settled at 11%. What it got was 13 years worth of growth in four weeks, says a senior payments executive. It is almost like demonetisation pulled the networks out of Earth’s gravitational field and time dilation did its job.

The two companies set up in India sensing a billion dollar opportunity as the country’s population was going to hit the one billion mark. And the one billion only used cash for payments. Over 20 years since then, the companies have had a hard time getting Indians to kick the cash habit. And proportionally, India accounts for less than 4% of the networks’ global revenues.

A small share

Visa’s revenue in 2017 was $18 billion and MasterCard’s was $12 billion.

So, demonetisation gave them a fleeting glimpse into what a cashless country looks like.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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