In a bid to boost digital transactions, Visa, the largest card payments network in the country, has decided to lower down the charges on debit card transactions. This decision by Visa will pave the way to increase in India’s digital payments market by enabling small merchants and customers to transact more in digital mode.
Visa said it would cut rates on debit card transactions by up to 95%. The largest quantum decrease will apply to transactions under Rs 2,000. The biggest slash in charges is applicable to the card issuing banks, which will drop to 15 paise for transactions under Rs 2,000 and to Rs 1.5 for high-value payments, from a uniform rate of Rs 2.99 per transaction. The Visa has also reduced the charges for merchant acquiring banks; the payments network has reduced charges to 15 paise per transaction of up to Rs 2,000, from 45 paise.
According to Economic Times, Debit cards account for 96% of the cards in use in India, but it is the credit cards that account for 51% of card payments in terms of value, ET reported on June 12. But with only 37 million credit cards in use in the country, as against 861 million debit cards, their usage does not translate to mass adoption of digital payments.
This move will be encouraging, as the acceptance of debit card payments will grow in small retail markets. Now it will become easier and more attractive for banks to deploy terminals at small shops; when accompanied by steps to increase awareness among small merchants, it will help reduce their resistance to card payments.
Visa commands more than 40% market share in India in terms of the number of card transactions on its network. It is facing tough competition from Rupay, which offers much cheaper rates at 90 paise per debit card transactions. Most of the payment banks and small banks have joined hands with the RBI-promoted NPCI, for offering the Rupay cards to customers. Recently, Rupay has also entered credit card market, which may bring the charges down in near future.
India has seen a faster adoption of a digital mode of transactions. In a recent report, India’s digital payments had tripled from 2.5 per cent to 7 per cent of the GDP in 3 years, and all set to reach 10 per cent by 2023.
The credit must be given to the combined efforts of government, regulators and even banks for providing impetus to digital transactions. Along with card transactions, UPI or United Payments Interface has gained immense traction in the past few months and been largely responsible for the digital push.
