India is no stranger to sanctions or denial of services. The country had faced sanctions in the wake of the 1998 nuclear tests. Subsequently, Indian oil companies dealing with Iranian crude had to take risks, with insurance companies facing the second-order impact as they could not get reinsurance support for covering companies that refined Iranian oil. In recent times, insurers are exposed again as global reinsurers are refusing to provide a cover for thermal power plants that use coal.
“In the payment world, India has built substantial capability since the launch of the RuPay debit card under the NPCI, which processes far more transactions compared to Visa/Mastercard,” said a regulatory source. The ATM network is also insulated as it does not depend on global networks as all banks are required to be members of the domestic network. Similarly, account-to-account transfers through the Unified Payments Interface (UPI) and the acquisition of these transactions are also on domestic payment rails.However, when it comes to credit cards, the Indian market is dominated by the Visa-Mastercard duopoly. While RuPay debit and credit cards would work in India, cardholders would have a problem with overseas transactions as the Indian card network is not international or regional network like China’s UnionPay. In Russia, there are reports that local banks will start issuing cards on their home-grown Mir network along with UnionPay — China’s multinational payment network.
In India, the RBI has insisted on payment networks storing data locally. Visa has complied with the regulations after spending hundreds of millions of dollars. Mastercard continues to face a ban from the regulator from issuing fresh cards. “However, data localisation does not mean that continuity of services can be maintained if a multinational player decided to withdraw,” said the official.
Officials said that as things stand, withdrawal of services by payment networks would create a disruption ranging from six months to one year in providing alternative card networks to banks. On the payment acceptance side, almost all merchant acquiring banks sign up shops on all three networks including RuPay, which would mean that there is no disruption at the merchant-end. While UPI does not have a cross-border dependency, two payment apps owned by multinationals — Google Pay and PhonePe have a disproportionate share of UPI transactions.
Finally, a large part of the fintech infrastructure in India that has been built by startups has been on the back of funding from multinational private equity firms. Incidentally, in the wake of the Russian crisis, some fintechs have received queries from investors on their exposure to Russia.