In mid-2018, Ajay Banga, the then CEO of Mastercard, enthusiastically defended the efforts of Indian Prime Minister Narendra Modi to promote electronic payments in the country’s cash-led economy.
Modi “gets it”, he told the audience in New York, emphasizing the role of cash in everything from financing terrorism to illegal drug transactions.
Three years later, his company found itself on the wrong side of India’s plans for the industry.
Reserve Bank of India last month Ban MasterCard Increased customers, claiming that it failed to comply with regulations prohibiting financial conglomerates from storing data overseas—implemented shortly after Banga praised Modi’s approach. The Reserve Bank of India imposed similar restrictions on American Express and Diners Club in April, weakening the ability of the American Group to expand in one of its largest growth markets.
The central bank and Modi have been working hard to make India less dependent on cash. Digital transaction Since the sudden withdrawal of high-value notes, which account for a large proportion of the country’s currency, in 2016, this number has been soaring. year.
Officials said that reforms are essential to reduce the cost of money printing, develop India’s economy, which is still mainly an informal economy, and increase financial inclusion and tax base.
The world is watching the evolution of the payment market in this country of 1.4 billion people. In a market where 20% of the population has no bank accounts and only 3% have credit cards, the expansion of financial services creates huge business opportunities.
Three Indian fintech groups-including AlipayPolicybazaar, backed by Alibaba and Softbank, recently applied for an IPO. “Everyone is competing,” said Rajan Bajaj, founder of Bangalore’s card startup Slice. “India is currently the world’s fastest growing credit card market. Our opportunities are huge.”
But critics say that policies such as data localization requirements Tripped MasterCard And American Express aims to consolidate control of commercial activities and establish trade barriers. A foreign executive said that Indian authorities “are considering trying to control things, rather than establishing an innovation framework.”
At the same time, the United States condemned India’s policies as “discriminatory and trade-distorting.”
this Rule established Any financial data processed overseas must be destroyed within 24 hours and stored only in India. Companies must submit third-party audits that show compliance, which the Reserve Bank of India said is necessary to prevent money laundering and other illegal activities.
Prompt change Angry lobbying When launched by American Payment Group. A person familiar with the company’s discussions with regulators said the company argued that these rules were costly and counterproductive, and encouraged other countries to take similar measures..
“The free flow of data across borders is the cornerstone of the strong strategic and economic relationship between the United States and India,” said Alexander Slater, deputy general manager of the U.S.-India Business Council, which lobbies for U.S. business interests.
Proponents of the rules countered that, according to estimates by the financial technology group PPRO, MasterCard accounted for one-third of the Indian card market, and despite ample opportunities, it failed to comply.
According to people familiar with the matter, the Reserve Bank of India took action after the company missed several deadlines to clarify how it handled the data. The person added that Visa was also questioned by regulators last year but was found to be in compliance.
Mastercard declined to comment on this, and Visa did not respond to a request for comment.
An Indian executive stated that data localization rules “have been very, very clear for a long time.” “Some foreign companies would rather sit down and lobby rather than fix their systems.”
Since the Reserve Bank of India imposed the ban last month, MasterCard has stated that it has submitted a new audit by Deloitte to address the concerns of regulators. Mastercard said in a statement: “We work closely with the Reserve Bank of India and the Indian government to ensure that we comply with the letter and spirit of the order.”
“We hope that the latest submissions will provide the assurance needed to resolve their concerns. We are committed to investing whatever resources are needed to meet any additional requirements.”
Existing customers of MasterCard and American Express were not affected, but the decision of the Reserve Bank of India made Visa the country’s only large foreign payment company without restrictions.
Its biggest competitor is now the National Payment Corporation of India, a non-profit organization established by the Reserve Bank of India and a consortium of Indian banks to develop payment infrastructure as the core of government policy goals. Its card operator RuPay has issued more than 600 million cards, and its UPI mobile money network soared to 3.2 billion transactions in July, more than double the number of last year.
American business groups argue that Indian authorities use regulation to tilt the market, which is beneficial to NPCI and other domestic companies Encourage national champions In terms of financial services.
This year, India invited companies to bid for the establishment of a for-profit business license to compete with NPCI. Interested people include Paytm, Mukesh Ambani (Mukesh Ambani) Reliance Industries According to informed sources, Tata Group and Tata Group.
Dilip Asbe, CEO of NPCI, stated that services such as RuPay and UPI have grown because they are well suited to the Indian market, promote social security payments, and allow easy mobile remittances without cards. The company is negotiating to set up UPI in other countries, including Singapore and the United Arab Emirates.
“We are working with [other card companies] On an open market. .. NPCI has always been committed to creating local innovative products,” he said. “Who prevents other companies from innovating? … We know very well that no matter what India needs, we will build. “
However, the authorities are not keen on a form of cashless payment: cryptocurrency, which the government has used for Threatened to banThe government sees digital tokens as a threat to monetary sovereignty control, and RBI and Many other central banks, Consider launching its own digital currency.
Some believe that India’s efforts to promote digital payments while maintaining market tightening reflect the changing political trends around the world.
“All the larger countries are… create border conditions so that they have a strong influence,” said a venture capitalist who invests in Indian fintech companies. “This is a global thing.”
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