Archive for May 8th, 2015

How a public sector organisation is shaping Indian payment system?

May 8, 2015

National Payments Corp of India is silently changing payments systems in India. Its Rupay system has challenged the duopoly of Visa and Mastercard in an amazing manner. Moreover, none of the other so called global players have managed this breakup of duopoly. Then it is responsible for ATM systems, mobile payments etc etc.

In a latest move it has lowered the transaction costs associated with ATMs:

National Payments Corporation of India (NPCI) has cut the switching fee for ATM transactions by 10 per cent to 45 paise on the surge in transaction volumes to 270 million per month from 80 million per month four years ago. The new rate is effective May 1. In 2010, NPCI had reduced the switching fee by half to 50 paisa per transaction.

State Bank of India executives said the bank had asked for a steeper cut in fees, since it gave substantial quantum of transactions. There is a scope for the fee to go down further in view of the surging volumes.

NPCI managing director and chief executive A P Hota said a company can certainly look at revising rates (downwards) further depending on further growth in volumes and saving on costs. Switching fee is charged by the NPCI for routing ATM transactions through connectivity between banks’ switches. This enables customers to use any ATM of a connected bank

Hmm..

It is interesting how a PSU of all is heralding these changes in India and that too silently.

The Austrian school might scoff at this and say well a private company would have done a greater job. And why just have one, bring in multiple such players so such costs actually become equal to marginal costs and are negligible. A good thing to discuss in an econ class..

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