Data rather than money – What the development of MasterCard tells us
The rise of national payment networks and the rapid scale-up of ubiquitous technology options indicate a rapidly changing regulatory and competitive landscape. The walls will rise higher as sovereign entities, independent institutions and large corporations all act to protect their data interests.
It is not something that is unique to India. The pipes of global monetary flows are operated and measured and the valves are installed by the sovereign authorities. The MasterCard ban is just a small glimpse of the obvious future. Naturally, the RBI does not want India’s data to be placed outside India, although the data is shared abroad for further processing and deletion. Data on payments relate to economic, monetary and banking health. It’s about your money and mine and your account status. It must be protected, judiciously. Guardrails must be clear and scalable. Regulation will drive out technology with some delay. But he must strive to do so relentlessly.
MasterCard reportedly made a big investment for a data center in Pune and argued that data mirroring helps detect trends in fraudulent transactions and that if Indian data is not used for this purpose, their detection systems will not be able to detect fraud. effectively in India either. They argued that to locate data storage they need to decouple local data from their back-end servers and this increases costs and consumes months of time and effort. The RBI, after proper assessment, passed the orders it did. MasterCard logic was not accepted. Visa, on the other hand, was happy to comply with localization standards much earlier.
I was Visa South Asia’s Marketing Director between 2011 and 2014, and shaped it through some interesting times. Stakeholder engagement was a key priority, whether they were consumers, issuers, regulators or opinion makers in general. When the NPCI was born, I was largely the marketing manager responsible for Visa. I was also the pioneer of the very first “Use Debit Cards Online” campaign called “Dream to Advance”. The main goal was to ensure that Visa is seen in a transparent way as a force for good. My effort was to explain and prove that Indian businesses, financial institutions and the larger nation-building task of financial inclusion have been aided by the participation of the world’s premier payments network. I also led the go-to-market work for a USSD-based mobile platform as a JV with Monitise plc. I have also been involved in a great effort with Mr. Nandan Nilekeni’s pioneering work with UIDAI to expand financial inclusion by expanding biometric account creations with every corner store set up as a potential correspondent bank. Many of these projects did not see the light of day, but the salient fact was that India was important and those doing business in India should put Indian interest first.
Now the MasterCard problem has direct repercussions – some credit card providers like RBL Bank, Yes Bank, Bajaj Finserv, and Flipkart-Axis had all of their credit card business on the MasterCard network and are almost entirely sure they would suffer from losses. business losses since them an extremely profitable offer for any lender. The only respite for them will come in the form of a reconciliation with Visa which will take another 8 or 10 weeks at the earliest.
This intervention is doomed to create a dominance of the Visa and Rupay networks at least in the space of credit cards. Visa already held 45% of the credit card market in India (Mastercard held 33%) and now that is expected to increase further.
But these are relatively minor consequences and adjustments when you consider the industry as a whole.
While the RBI was busy punishing Diners, Amex and Mastercard for failing to meet Indian data storage standards, fintech startups have raised record-breaking sums ($ 34 billion this year alone) around the world and guess what is. at the heart of their activity. model? Data.
Paypal and Stripe are payment platforms and are valued at $ 310 billion and $ 95 billion, respectively. Swedish startup “Buy now, pay later” Klarna is valued at $ 46 billion while Grab in Indonesia is valued at $ 40 billion. RazorPay and Paytm are among the top Indian startups in this space, although their value is not as high as some of the foreign companies.
Fintech players like UPI have already led to an increasing democratization of payments (it quickly replaced debit cards and net banking transactions). Now, with no new debit or credit cards from Mastercard, UPI appears to be the biggest beneficiary, even more than any other credit or debit card network provider!
It seems governments around the world are now realizing the growing importance of payments and data in general and wanting to exercise as much control as possible. They believe this surveillance is necessary for better law enforcement and to prevent any foreign surveillance on their citizens. Additionally, the data breaches have made regulators more skeptical. The governments of Russia, China, India and Indonesia insist on national storage of data relating to their citizens.
The entire fintech industry is exploding with solutions from all regions of the world. There are payment networks, payroll management systems, e-commerce portals, taxi services turned lenders, wealth management platforms, insurers, and more. consumers are better off when they use these services. These services are particularly beneficial for emerging markets, as banks do not or cannot provide services to everyone.
The growth of data is only just beginning and more frequent data will be generated from all walks of life as we move forward and technology makes more inroads into our lives. Fintech players and NBFCs currently represent more than half of all financial assets worldwide. Compared to the established global duopoly of Visa and Mastercard, today there are many NBFCs and FinTech providers who strive to make transactions and have a seamless experience while being more profitable than traditional banks! The main difference between these companies is that while banks play with money first, fintech plays with data first. This tells us about the rapid adoption of technology to meet the needs of consumers everywhere and data is at the heart of everything.
We’d probably be better off not trapping this data in silos and instead having mutually beneficial data transmission through partnerships based on trust. More advanced use cases will continue to evolve and everyone would benefit from the flow of this data.
Our payments ecosystem in India must evolve in a way that is productively propelled, not delayed, by localization requirements. There is a tsunami of positive change at the door of consumers as well as regulators across the world and we should welcome and participate in it.
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