Visa says will compete on costs with RuPay

As it faces local competition, Visa Inc, the payment services provider, is focusing on investment, innovation and providing values to customers in India. Uttam Nayak, group country manager- India & South Asia, spoke with Vishwanath Nair &
Neelasri Barman, about Visa’s plans in India and the card industry in general. Excerpts from the interview:

Q: RuPay, the payment services promoted by National Payment Corporation of India, is offering lower costs of clearing and settlement for each debit card transaction. How are you planning to beat the competition?
A: The payments industry needs more people, so in that sense RuPay is welcome. We are working on a global scale in a very cut-throat market and have always been competitive. We have very strong commercial agreements and banks are extremely happy with Visa. I have not heard bankers saying that Visa is expensive. We do not charge consumers. A consumer uses these cards based on what value proposition and security he gets. He does not care what is being charged to the bank. I think we should focus on the value proposition that will be offered to the consumer, how we will expand acceptance and educate consumers? It is one part of the puzzle to launch the cards. We spend millions of dollars on consumer education, awareness and brand building.

That is very important. We have to bring in features to attract customers. It has to work on the internet, on point-of-sales and also internationally. Cost is one element and we will definitely compete. But I think our focus is to invest, innovate and offer value to consumers.

Q: In the other international markets too, local players have come up with products like RuPay. How are you competing there?
A: Except for China, where China UnionPay has got a monopoly and does not allow anybody to participate in the domestic market, the rest of the world is where people compete. We are leaders in almost all the other countries. May be in one or two countries, our nearest international competitor might be the leader. This is despite local participation in every other part of the world. For example, the US has got eight to ten players, and we compete with them and are ahead of the game. We have stayed ahead of innovation and ahead of security, and that has driven our success.

Q: RuPay is planning to go international next year. Are you open to collaborating with them on an international scale?
A: We are always open to participating with local players to expand the market. We always make sure we work in collaboration and will continue to do that. This is because market development is not one player’s responsibility. That happens when many players work together.

Q: Use of credit cards is a significant contributor to bad loans in a rising interest rate scenario. Considering this, many banks are going slow on credit card growth. How do you expect the business to grow?
A: The global credit card industry goes through cycles, because the credit cards business is largely tied to the macroeconomic environment. If the environment is positive, people spend more and are also able to repay. When the economy went through a challenge, people stopped paying their bills and banks became cautious. But that resulted in better selection of consumers. Now, banks use credit bureaus to investigate. This had weeded out bad customers, and they are focusing on getting the right ones and growing the business. There are four to five banks that are very aggressively and successfully growing the business. But since they are also weeding out bad customers, the net number looks negative. The other good thing is all the banks are focusing on tier-2 and tier-3 markets because that is where growth is going to come from.