New Delhi: Mastercard, the world's second-largest payments processor, has said Prime Minister Narendra Modi is using nationalism to promote domestic payments platforms like RuPay, which is hurting foreign payment companies. 

US companies in India have been increasingly battling and complaining about Modi’s policies they perceive to be protectionist. This year, US technology companies have protested against an Indian law that would require them to store more data locally, raising their costs. 

A report published by Reuters showed more than half of India’s one billion debit and credit cards now go through the RuPay payment system, and that means companies such as Mastercard and Visa face an uphill task to expand rapidly in one of the world’s biggest payments growth markets.

Modi has publicly endorsed the indigenous card payment network, saying using RuPay was like serving the country as its transaction fee stays within India and could help build roads, schools and hospitals.

In a written reference to Modi’s stance, Mastercard told the Office of the United States Trade Representative (USTR) on June 21 that India “associated the use of RuPay cards with nationalism, claiming it serves as ‘kind of national service’.”

The note, which was sent by a Mastercard Vice President for Global Public Policy, Sahra English, said that, while Modi’s digital payments push was “commendable”, the Indian government had adopted “a series of protectionist measures” to the detriment of global companies.

The USTR did not respond to a request for comment and it was not clear whether the US agency raised Mastercard's concerns with the central government. Visa did not respond to Reuters' queries.

In November 2016, PM Modi started promoting the use of digital payments after replacing high-value currency notes in an attempt to crack down on the black economy.

That increased card usage: Indians in August clocked transactions worth $51 billion on debit and credit cards, nearly double the amount recorded in November 2016, according to data from the central bank, which does not provide separate usage statistics comparing Indian and foreign payment networks.

Foreign card companies have also had to contend with a growing use of mobile wallets and state-backed digital money transfer services, some of which PM Modi promoted.

RuPay received a major boost due to PM Modi's financial inclusion programme launched in 2014, which meant that all Indians opening a bank account for the first time were offered a RuPay card, not a Mastercard or Visa.

The Indian card network was developed by the National Payments Corporation of India (NPCI), a group largely owned by state banks but which also counts private and foreign banks among its shareholders. It also oversees the payments services in India.

In its note to the USTR, Mastercard said the government had mandated banks to support the NPCI directly and indirectly, making it the "sole beneficiary" of PM Modi's financial inclusion programme.

The NPCI acted both as "a quasi-regulator and a competing payment network", Mastercard said, adding that this was "compounded by the government's open preference for RuPay with misleading statements and inaccurate information on pricing, despite Mastercard being priced lower than RuPay".

Pricing refers to the fee paid by banks to payment processors such as Mastercard for card transactions. The company did not detail which specific statements it was referring to.

PM Modi in June said foreign card companies take their transaction fees abroad and as "everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation".

A month later, Mastercard issued a press statement which said the company gets only 15-20% of debit card transaction fees, while the rest stays "within the Indian economy". It did not name RuPay.

(with agency inputs)