How Will UPI’s Business Strategy Kill Visa Or MasterCard?

The question arises: how will UPI’s business strategy kill Visa or MasterCard? The business model behind UPI has many components, including pricing, a Real-time electronic payment system, and a Threat to card companies’ turf. Let’s examine each of these parts in turn. This article will explore the pricing aspects of UPI as well as how RBI’s pricing strategy contributes to its overall strategy.

RBI’s pricing part of UPI’s business strategy

The RBI’s announcement that it’s linking UPI with credit cards will spur the use of the digital payment system and bolster merchant partnerships in the country. While the RBI hasn’t said exactly why it’s linking UPI with credit cards, it’s safe to say that the decision will help boost usage of the new payments option and pave the way for other geographies to adopt it, too. If the RBI’s move is successful, it will be a significant step toward creating a cashless economy.

The UPI payment option is fast gaining ground as smartphones become more popular. While it’s not a replacement for credit cards, it does avoid merchant discount rates, which merchants typically pay to banks and payment processors for accepting credit card payments. However, the UPI system will initially be restricted to RuPay cards, with Visa and Mastercard joining soon after. Additionally, UPI still faces some issues with MDR and KYC norms. This means that it could potentially dent the PoS terminal market.

The UPI system is supercharging India’s transition to non-cash payments. It has increased its transaction volume nine-fold in three years, and UPI transactions will make up 60% of non-cash transaction volume by 2026. The RBI is betting that this technology will eat up Visa and Mastercard’s market share by 2026. It’s likely to make this transformation a reality, despite the uncertainty surrounding the future of the credit card industry in India.

Real-time electronic payment system

Whether the Real-time Electronic Payment System will kill Visa and MasterCard remains to be seen. While the big issuers have been enabling peripheral business models, they have been hesitant to join the movement. The accelerating growth of the P2P payment industry is likely to force the issuers to join the action. Nevertheless, they are not alone in the race toward faster payments. Visa, Mastercard, and other issuers have been working with the Federal Reserve’s Faster Payments initiative task force.

The two major companies are vying for market share in the debit space. In the U.S., MasterCard is the late entrant in this market, focusing instead on signature debit and PIN-based Maestro. However, the company reaches 97% of banks and credit unions. In the rest of the world, Visa is less widespread. Its share of real-time networks is just half that of MasterCard.

A key challenge in the real-time electronic payment system is transparency. A lack of transparency in the supply chain has been an issue for consumers since goods were first produced. Providing proof of provenance is one way to overcome this problem and prevent loss or theft. For decades, Visa and Mastercard have worked to improve the financial sector. Since then, they have focused on enhancing user experience and functionality. They also prioritize security, creativity, and interoperability in their efforts.

This technology is expected to disrupt the conventional payments industry, including card processing. The Mastercard blockchain platform, developed with scalability in mind, offers good processing speed in commercial transactions. In addition, its extensibility and scalability make it suitable for a global ecosystem. It will also help ensure that users can trust the moderator of the network. It will not only make payments more secure but also enable fast tracking for consumers.

The real-time electronic payment system is likely to lead to the death of the two giants. It will give issuers the ability to offer cards wherever they are accepted. It will eliminate the need for the issuers to maintain their own infrastructure. Eventually, this will result in a more open financial system. But there is a downside. While real-time electronic payments will likely kill Visa and Mastercard, it will also make it easier to compete in the future.

The US government has recognized the need for a real-time financial system. But, it doesn’t want to play favorites. Instead, officials at the Federal Reserve have said that they don’t want to pick winners and should stay out of the market. They don’t want to be able to control the market and choose which companies will be the winners and losers. By allowing the tech companies to make their own money, the banks will have to give up their current revenue model.

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