Many countries have recently promoted domestic payment cards to reduce dependence on international payment systems like MasterCard and Visa. This trend is caused by several factors, including the desire to increase financial inclusion, promote the use of domestic currencies, and support the growth of domestic banks and payment processors.
One of the main reasons for promoting domestic payment cards is to increase financial inclusion. Many countries, particularly in developing regions, have large populations that are underbanked or unbanked. By encouraging domestic payment cards, governments can help bring these individuals into the financial system and give them access to essential financial services such as banking and payments.
Encourage the Use of Domestic Currencies
Another reason for promoting domestic payment cards is to encourage the use of domestic currencies. In many countries, international payment systems like MasterCard and Visa are primarily used to make transactions in foreign currencies. By encouraging domestic payment cards, governments can reduce the need for foreign currencies and better control the flow of money within their borders. This can help to stabilize the domestic currency and reduce the risk of currency fluctuations.
Promoting domestic payment cards can also support the growth of domestic banks and payment processors. Large, foreign-based companies typically operate international payment systems like MasterCard and Visa. By promoting the use of domestic payment cards, countries can help to support the growth of domestic banks and payment processors, which can, in turn, boost the local economy.
For example, China has been promoting using its domestic payment system, UnionPay, to increase financial inclusion and reduce its dependence on international payment systems. As a result, UnionPay has become the dominant payment card in China and is now accepted by over 40 million merchants worldwide. Similarly, India is promoting using its domestic payment system, RuPay, to increase financial inclusion and reduce its dependence on international payment systems. As a result, RuPay is now India’s second-largest payment card after Visa and MasterCard.
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Save Incurring Foreign Transaction Fees
Recently, the Central Bank of Nigeria launched a domestic card scheme to compete with foreign cards such as Mastercard and Visa. The goal of this move is to further the country’s push towards a cashless society, as well as to save Nigeria from incurring foreign transaction fees.
Other countries, such as Russia and Turkey, have also been promoting the use of domestic payment cards as a way to reduce their dependence on international payment systems.
It’s worth noting that domestic payment systems may have limited acceptance outside the countries they are based in and may not have the same level of security and fraud protection as international payment systems like MasterCard and Visa. Additionally, consumers may not be familiar with domestic payment systems and may be hesitant to use them.
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Conclusion
Countries worldwide promote using domestic payment cards to reduce their dependence on international payment systems like MasterCard and Visa. This trend is inspired by the desire to increase financial inclusion, promote the use of domestic currencies, and support the growth of domestic banks and payment processors. First, however, it’s essential to consider the potential limitations of domestic payment systems and the need for consumer education and acceptance.
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