Like Visa, MasterCard and China Union Pay, RuPay is a card network. It earns a part of the interchange revenue (usually 0.25%) when a Consumer pays a Merchant with credit or debit card.
RuPay is an Indian company unlike the other three card networks mentioned above.
At a high level, therefore, if a Consumer uses a RuPay card, RuPay should benefit and, by extension, Indian government should benefit.
But things are not as simple as that at the ground level, where many factors enter the picture:
- Does RuPay make profits? If RuPay makes losses, Indian government earns no tax revenue from RuPay when a Consumer pays with a RuPay card.
- RuPay’s revenue is Merchant’s cost. The fees paid by Merchant (indirectly) to RuPay is tax deductible for the Merchant. Accordingly, the Merchant’s tax liability reduces and the Indian government collects less tax from Merchant when a Consumer uses a RuPay card to pay a Merchant.
- By accepting a RuPay card, is the Merchant increasing his sales? If yes, then profits may increase, despite fees paid to RuPay, and Indian government will receive more tax from Merchant.
These are only a few points that come readily to mind. But I guess they’re enough to convey the basic point that, in the current transient state of RuPay’s lifecycle, use of RuPay does not automatically guarantee that Indian government makes money or gets any other other benefit.
At steady state, RuPay and Indian Government hope to get benefits from increased use of RuPay. But, in the card network business, steady state can take several decades to happen. Many decades after Visa and MasterCard have come into existence, competing card networks don’t have a very impressive track record.
So, we need to wait and watch what happens with RuPay.