Tuesday, December 4, 2018

Know the difference between Visa, MasterCard and RuPay card.

Difference between Visa, Mastercard and Rupay Card

We all use debit cards. We use it for online shopping at stores and bill payments. Have you ever thought about the logo that is printed on the card with the bank name? VISA, MasterCard, RuPay etc. What are they? What is the difference between these? Let's find out here.

Whenever a bank issues you a debit card, it can issue you 3 different kinds of cards which are Visa, MasterCard or RuPay card. In this article, I am going to explain the difference between these.

But, before understanding the difference, let us first understand the need for a card. Why this debit card concept came into the picture.

The Problems

Earlier what happened, to keep our money we needed a bank. We used to deposit the cash and as per our need, we withdrew it from the bank. Since the time passed, the bank grew and so its number of customers. You had to wait in a long queue to withdraw the money. This process was consuming a lot of time and also bank has to maintain the infrastructure to handle a large number of people.

To tackle this problem, banks came with the concept of a card. They provided a card to the customer and set up an ATM (Automated Teller Machine) where you can insert your card, input your password and withdraw your money without visiting the bank.

This setup was running when another problem came into the picture. Shopping. People withdrew their money to do shopping and making payments like electricity bill, telephone bill etc. In this scenario, first, you have to withdraw the money and then do your shopping, give the cash to the seller and the seller will deposit the same money to the bank. This process was lengthy.

To overcome this problem, the concept of debit card arose. The need here is to transfer the money within the bank without the actual money in the hand. In this case, a customer can pay to the shopkeeper with a card and the money would be transferred to the shopkeeper's account directly. The shopkeeper has a card swiping machine which would read the customer details from the card like account number, account balance etc. and then generated a request to the bank to perform the transaction. However, this process looks good but it also has its cons.

This process can transfer the money into the accounts of the same bank. Means, if a customer has the account in ABC bank then the shopkeeper has to keep the card machine of ABC bank. This was problematic because customer and shopkeeper can have accounts in different banks and it is difficult to keep the card machine of each and every bank.

Understanding VISA and MasterCard

To solve this problem, two companies VISA and MasterCard came with an idea. These two are competitors in the market. They developed a network so that money can be transferred between different banks.

Difference between Visa, Mastercard and Rupay Card
VISA and MasterCard collaborated with almost every bank in the world and developed a mechanism to access their data. They provided the card number and asked the banks to print the card with their logo on it and issue it to the customer. These cards are globally acceptable.

The customer can now use this card for online shopping or in a store with POS (Point Of Sale) machine. The card is accepted at various payment gateways and now when the card is swiped a request is generated for VISA/MasterCard. Since they have access to the bank's data, they debit the amount from the customer's account and deposit that money to the seller's account. However, the money is debited instantly but the process of depositing takes one or two days.

So what we understand here is VISA and MasterCard are nothing but mediators between the customer's bank and seller's bank.

These two are American companies. They charge a fee for every transaction happen through them. The fees vary between 1% to 2%. The servers for these companies are located outside India. They keep all the logs and have access to every transactional data.

Evolution of RuPay Card

Let's talk about India. The transaction that happens within the country. The seller and the customer, bank accounts of both are located within the country. There is no need to that first the request is sent to an international company, then they process that request and deposit that money to an Indian bank only.

So if the transaction is meant to stay within the country then why would we expose our data to the outside world. This information is sensitive. The request sent to VISA and MasterCard may contain your account details, account balance etc. To mitigate this risk NCPI (National Payment Corporation of India) came with the same idea like VISA and MasterCard but which can be mostly used in India only.

NCPI developed RuPay card. The RuPay card was launched on 26 March 2012. RuPay comprises of two words, Rupee + Payment. They collaborated with all the banks in India. As compared to VISA and MasterCard, the transaction fees for using a RuPay card is negligible and also the fees for issuing a RuPay card is almost zero. Also, the information sent over to perform a transaction stays within the country and data is not being shared with the outside world.

Difference between Visa, Mastercard and Rupay Card
Since RuPay has been developed by GOI (Government of India), the government is promoting the banks to issue RuPay card to their customers. RuPay card is getting popular day by day and VISA and MasterCard are losing market shares in India so they have now started their advertisements on television saying their cards are globally accepted which is true.

But, if a transaction is meant for India only, there is no need to pay a hefty transaction fee to international companies like these where the 100% profit is taken to outside India. Instead, we can use RuPay card where the profit stays in India and can be used to develop the Indian economy and infrastructure.

RuPay also has international existence where the card provided is RuPay Platinum card. Banks decide on their own to whom this card has to be issued. Mostly the card issued is a RuPay card.

The bottom line is VISA, MasterCard and RuPay, all are mediators, a network to make the inter-bank transaction possible for which they charge a fee for every transaction.

I hope you liked this article. Keep reading, more to come.

Write comments
  1. Very informative article Saurabh! Thanks.

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