The news: The Indian government will spend $318.4 million to promote homegrown card network RuPay and the Unified Payments Interface (UPI), India’s mobile bank-to-bank instant payments system, per TechCrunch.
New Delhi hopes offering a financial incentive will encourage more banks to offer customers RuPay cards and increase small-value consumer-to-business (C2B) UPI payments before the fiscal year ends on March 31, 2023.
Key context: UPI and RuPay have played a major role in fueling digital payments adoption across India.
The problem: While RuPay and UPI have been widely embraced by consumers and merchants, large banks and payment providers aren’t as keen to promote the systems because they can’t earn significant income from them.
What this means: While UPI and RuPay have already made inroads across India, there's still room for growth—especially with large banks like HDFC, which reportedly doesn’t have much interest in issuing RuPay credit cards, people familiar with the matter told TechCrunch.
By giving banks and providers financial incentives to promote RuPay and UPI, the government can minimize Visa’s and Mastercard’s power within India’s payments space and encourage digital payments adoption across the country.
This is bad news for multinational card networks because it might decrease their revenue potential in a major market: India’s digital payments market size is expected to increase from $3 trillion in 2022 to $10 trillion by 2026, according to a report by Boston Consulting Group and PhonePe.
This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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