Visa Concerned Over India’s Backing for Rival RuPay

Global payments company Visa Inc. (V) has reportedly shown concern about India backing its local payments company RuPay. India is a key market for Visa and the payments giant is worried that India’s “formal and informal” backing for RuPay hampers both its current and future business potential. Shares of Visa are up 1.1% during pre-market trading at the time of writing.

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RuPay’s Dominance

According to Reuters, Visa complained to the U.S. government about the absence of a “level playing field” in India during an August 9 meeting between the U.S. Trade Representative (USTR) Katherine Tai and company executives, including Visa CEO Alfred Kelly.

However, Visa has publicly refrained from acknowledging the issue and RuPay’s dominance, which is backed by the Indian Prime Minister Narendra Modi.

Similarly, Mastercard Inc. (MA) had also raised similar concerns with the USTR in 2018, stating that the Indian Prime Minister was promoting the local network in the name of nationalism. “Everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation,” Modi said in a speech in 2018.

India and its leaders continue to support RuPay by directing banks to issue RuPay cards and promote a RuPay-based card for public transportation payments. As per the most recent statistics, RuPay is considered to be the largest debit card issuer. Meanwhile, in the credit card segment, both Visa and Mastercard together process more than 70% of the total transactions.

According to the Reserve Bank of India, the actual number of transactions carried out via credit cards was 185 million, and via debit cards was 901 million in September 2021.

This translates into a total transaction value of $53.32 billion ($1=INR 75). The statistics prove the massive market opportunity of the Indian payments network, which Visa could stand to lose should RuPay continue to capture the market share at an accelerating pace.

Additionally, in 2018, the Indian central bank directed the payments networks to store payments data “only in India” citing “unfettered supervisory access”. In July 2021, Mastercard was banned indefinitely from issuing new cards in India because it did not comply with the 2018 ruling. The ban on MA means that Visa and RuPay stand to gain an incremental share in the market.

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Target Price

With 14 unanimous Buys, the Visa stock commands a Strong Buy consensus rating. The average Visa price target of $277 implies 40.25% upside potential to current levels. Shares have lost 6% over the past year.

Website Traffic

TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into V’s performance.

In October, Visa website traffic recorded a 20.72% year-over-year decline in monthly visits. Similarly, year-to-date website traffic growth decreased 5.29% compared to the same period last year.