How Will UPI’s Business Strategy Kill Visa and Mastercard?

Business Strategy Kill Visa and Mastercard: Why can’t a competing payment network compete with Visa and Mastercard? To succeed, a competing network would need to be ubiquitous with cardholders and merchants. Fortunately, Apple teamed up with MasterCard to help process transactions. Apple has hundreds of billions of dollars in resources and an exceptionally skilled engineering workforce. If the RBI ban on Mastercard is a harbinger of bad news for credit card companies, it is not the end of the world.

UPIs business strategy

There’s a debate going on about how UPI will kill Visa and Mastercard. During the Express IT Awards in April, we discussed how this new payment system could decimate both the card and cash industries. While some say UPI will kill the cards, others argue that it’s an essential part of digital diplomacy. It’s also democratized credit, the value of Big Data, and digital diplomacy.

However, we must keep in mind that UPIs represents a big opportunity. Globally, 80% of purchase transactions still involve checks or cash. In fact, these methods of payment account for nearly $18 trillion in PCE – personal consumption expenditures. So, the companies that own the networks that enable electronic payments will stand to benefit massively. And this opportunity will only increase. And as more emerging markets move to digital payment systems, Visa and Mastercard will be more important than ever.

Impact of RBI ban on Mastercard

In a sweeping move, the Reserve Bank of India has banned MasterCard from issuing new cards to Indian citizens. The RBI cites non-compliance with its Payment System Data (PSD) mandate, which requires foreign payment providers to store Indian users’ data locally. The ban is effective July 22. It will not impact existing Indian MasterCard customers. The impact is not yet clear, though. Despite its broad scope, the ban is bound to have an impact on Mastercard’s business strategy.

The RBI had restricted two of the three major global card networks from issuing new cards in India, Mastercard and Visa. The RBI had also banned Amex from storing payment system data locally. This would have a significant impact on India’s payments system. Currently, Mastercard controls about 30 percent of the credit card market. In addition, some private banks in India only issue credit cards using its platform. Despite the restrictions, Baliga remains optimistic about the future of the industry.

Impact of UPI on Visa

The new technology could significantly affect the way consumers pay for goods and services. While the PCE payment flow accounts for the majority of MasterCard and Visa transactions, the technology is also beginning to affect other payment flows, such as peer-to-peer payments and business-to-business payments. In fact, it could take a large chunk of cash from other payment flows, including B2B and P2P. And the government could also move some of its Social Security payments to electronic payments. Regardless of their size, Visa and Mastercard are expected to remain important players in the financial sector, as governments in emerging markets are increasingly encouraging the use of electronic payments.

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As of today, more than 80 percent of all purchase transactions are conducted using cash or checks, accounting for nearly $18 trillion of global PCE (personal consumption expenditures). That represents a huge market opportunity for Visa and Mastercard, which own networks that enable electronic payments. As a result, the two companies will likely continue to enjoy a healthy growth rate for the next decade. They will need to ditch plastic cards and let the disruptive disruptors connect directly to the toll road.

Impact of UPI on Mastercard

The impact of UPI is a hotly debated topic in the payments industry. As a means to facilitate digital payments, UPI links debit and credit cards. Now, RuPay credit cards will be linked with UPI. RuPay governor believes that this move will bring convenience and increase the scope of digital payments. Transactions conducted using UPI will be subject to the Merchant Discount Rate (MDR), which is a percentage of the transaction amount split between the payment service provider and the banks.

Private sector banks control a large portion of the credit card market, which is why they are likely to participate in UPI, even if it does not directly impact them. Private sector banks, which have significant market shares in credit cards, are likely to be keen to participate in the UPI ecosystem only if their Visa/Mastercard cards align with it. As the system is linked to underlying bank accounts, private banks may be more willing to offer UPI to consumers as a way to increase their small-ticket credit penetration and attract new credit customers.

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