How do you address the challenge of credit card market share at a time when RuPay-linked cards on UPI have an advantage?
It is important to understand the context behind the notion that credit cards are slowing down and UPI is taking volume away. About 15 years ago, when there was no UPI or RuPay, there were just two or three international competitors in India. Fewer people had credit cards, probably 10-15 million. It was a very small field of play where people were actually using cards or had an understanding of cards or digital payments at large. Today, there are 110 million credit cards, with 55-60 million unique users. The market has only grown from 20 million to 60 million for a population of almost 1.5 billion.
China has about 1.5 billion people, roughly the same as India’s population. It has 550 million credit cards, and about 350 million are unique credit card holders. That’s the runway we are talking about. There’s no challenge in the credit card market; there is an opportunity.
How has growth been for you as the overall digital payments market has grown?
In India, there is a multitude of rails available, including traditional credit cards, debit cards, real-time gross settlement, national electronic funds transfer, netbanking, UPI, and RuPay on UPI. The digital payments jungle has become very big. We remain relevant in that jungle. If the jungle is so big, it is mathematically impossible for it to be majority-owned by the three original players — us and the other two big players.
We have seen healthy credit card growth over the past five years. The last year was a little slower, primarily because the market was undergoing a structured realignment: the Reserve Bank of India told banks to control losses and banks were cleaning up their books by discontinuing inactive cards. There was a slowdown in the number of cards being issued last year.
We are also going after new banks because the top five issuers themselves — who control 90-95 per cent of the market — don’t have the issuing wherewithal to take the number of unique customers from 55 million to 150 million. It has to come from credible, smaller players.
What’s going to be your growth engine going forward, and what new use cases do you want to target?
Our growth was centred around Tier-I cities, with most of our cardholders in the top eight or nine cities. Growth will have to come not from cities but from Tier-II, Tier-III, and Tier-IV India. I will have to keep doing well on my current base and find new pockets for digitisation.
Today, about 350 million users are on UPI. One can assume that the 55 million card customers are already within that cohort. I have to offer certain flows on cards, and that is my growth engine. We’re going to stay after the affluent, small and medium enterprises, commercial travel and entertainment, digitising fleet expenses with cards for fuel and other expenses, and youth.
Have you been able to recoup market share losses after the embargo four years ago?
We have grown market share in the last three years.
How has the mix between your core payments and non-payments revenue evolved?
When I joined Mastercard in the US 12 years ago, we made roughly 78 per cent of our revenue globally from core payments. The rest came from services adjacent to payments, including safety, security, artificial intelligence, and data analytics. These are global revenue figures.
Our then chief executive officer Ajay Banga had declared that by 2020, 40 per cent of our revenue would come from services. We had to innovate beyond being a dumb pipe. The revenue from services now stands at between 40 and 45 per cent globally. Our core payments have also grown, but services have grown faster, and therefore the mix has changed.
In India, we were at a much lower number than our global figure, but have significantly moved the needle in that direction. I would say the aspiration remains that a healthy 40-45 per cent of my revenue mix comes from services.
Have you explored a way to link your network to UPI?
The reality is that RuPay and UPI are today national prides of the country. In many ways, it’s the decision of the Government of India. We would like to participate to the extent possible in a credit line on UPI or a credit card on UPI, much like RuPay.
The devil lies in the details: what does participation mean? If it makes sense for us, why would we not want to participate, because it unlocks a lot more consumers than we have today? We have 17 million acceptance locations in the country today; UPI has many more. It has to be economically sustainable.
Have you formally approached them on the matter?
We have explored it, yes. We are exploring it, and we continue to explore it.
With Apple Pay coming to India, are you encouraging more credit card issuers to partner it?
The role that the networks play in the launch of Apple Pay is that of a network. We are in the middle of it. The issuers have to decide whether they want to make their products available on Apple Pay or not.
We, because we are a global network, already participate in Apple Pay wherever it is offered around the world. For us, it’s a matter of integrating Indian issuers with Apple Pay. To the extent that Apple is talking to an issuer, we will also be very keen to work with that issuer.
Today, there is no issuer in the market, for the most part, that is exclusive to one network or the other. So, as long as the issuer comes and wants to be on Apple Pay, it would be unforgivable for us if we were not to participate in that.
