India's banks mull rival network to MasterCard and Visa

India's banks mull rival network to MasterCard and Visa

India's banks are considering setting up a domestic card payment settlement system to rival the networks operated by Visa and MasterCard, according to a Business Standard report.

At present, all card-based transactions are settled through the global payment network of Visa and MasterCard. The plan, taken up under the aegis of the Indian Banks’ Association (IBA), comes amid estimates that payments through cards would increase three-fold over the next five years.

Every Indian eftpos transaction currently involves payment of an interchange charge to MasterCard or Visa for settlement, which amounted to about $50 million during 2005-2006. A domestic card payment settlement company would save the outlay on commission paid to Visa and MasterCard, a senior banker told the Standard.

Depending on the cost advantage and nature of transactions, different infrastructure could be used, said bankers. For international transactions, the 'India Pay' switch could connect to MasterCard or Visa. The gateway could also interact with another payment system like China Union Pay.

"We have had some discussion. The management committee of IBA will look at whether a commercial model can be built, as it would require investment and the current system has stabilised over the years," a senior IBA official told the paper.

Sanjay Sharma, chief technology officer, IDBI Bank believes the benefits would outweigh the disadvantages.

"India Pay would provide national infrastructure to be used with a minimum of cost and allow a wider reach," he told the Business Standard. "If we look at it from the perspective of benefits, the costs would be justifiable."

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