IBA plans card payment settlement firm

Indian Banks' Association (IBA), the representative body of banking industry, is busy drafting a business plan to create IndiaPay, a national card payment settlement company, which is envisaged to be India's answer to global players Visa & MasterCard.

"IndiaPay would provide national infrastructure for all card-based electronic transactions. It will benefit us with minimum cost while allowing a wider reach," Sanjay Sharma, chief technology officer, IDBI Bank, said.

Sharma, who is also the convenor of the IBA sub-committee assigned with the task to prepare a business plan, feels that with a national payment infrastructure, Indian banks will save large amount of money paid as fee to Visa and MasterCard. India is one of the fastest growing credit and debit card markets for these global payment agencies.

According to provisional figures released by the Reserve Bank of India on January 16, 2008 (till November 2007), India had about 2.5 crore credit cards carrying transactions worth Rs 36,661 crore.

The debit cards in India are more than nine crores carrying transactions of about Rs 7,827 crore. As all these cards either have Visa or MasterCard association, every single transaction entails a small fee to be paid to them.

"While we do not have the exact amount paid by Indian banks annually as fee, we have reasons to believe that it is very high," Sharma said.

His sub-committee expects to prepare a business plan in the next couple of months to put up before the IBA Managing Committee, which then will get an endorsement from RBI.

"Similar national payment systems are operating in other countries of the World like China has China Union Pay," Sharma said. On the company structure, he said that it could either have an independent structure or could be outsourced.

"All banks will be stakeholders in the company, which will ensure that large volumes drive down cost and even the smallest bank could benefit," he said.