The Reserve Bank of India (RBI) has taken a groundbreaking step by introducing a draft regulation that gives users of debit, credit, and prepaid cards the freedom to choose their desired card network. This move has the potential to revolutionize the global payment landscape, as it challenges the current practice of predetermined card network options established through agreements between issuers and networks.
In a draft circular released by the RBI
it is stated that card issuers will be forbidden from entering into any arrangements or agreements with card networks that restrict them from utilizing the services of other card networks.
The RBI has highlighted that the current arrangements between card networks and card issuers (both banks and non-banks) do not promote customer choice. According to the draft circular, card issuers will be required to offer their eligible customers the opportunity to select any one of the available card networks. This choice can be exercised by customers either during the card issuance process or at a later stage.
What does card network portability mean?
Card network portability refers to the ability of consumers to transfer their card accounts from one network to another. Similar to switching mobile service providers while retaining the same phone number, card network portability enables cardholders to maintain their existing card accounts, balances, and credit history when transitioning to a different payment network.
According to Amit Gupta, Managing Director of SAG Infotech, this flexibility empowers consumers to choose the network that best aligns with their preferences, such as rewards programs, acceptance, or customer service. It fosters competition among credit card networks and grants consumers greater control over their financial decisions.The RBI has requested feedback from stakeholders on the draft circular until August 4th.
Ranadurjay Talukdar, Partner and Payments Sector Leader at EY India, expressed that the RBI’s proposal is a significant step as it expands consumer choice and puts an end to exclusive issuance agreements between card networks and leading issuers. This move is expected to encourage banks to issue credit cards on UPI (Unified Payments Interface), which is considered the most compelling offering on the credit side from the Rupay network.
Additionally, it may lead to an expansion in the availability of Rupay variants, as several private sector banks currently have exclusive arrangements with either Visa or Mastercard. On the debit side, Rupay cards are predominantly issued by most public sector banks, contributing to the majority of the issuance volume.
RBICard Network Portability Proposal
While the draft proposal brings significant advantages for customers, empowering them with decision-making authority and portability, banks may encounter operational challenges and increased costs. According to Anadurjay Talukdar, banks will need to review existing agreements, establish new partnerships, adjust customer onboarding processes, conduct additional training, and reassess customer profiling. The impact on the manufacturing process of all banking cards will need evaluation in the coming months.
Banks have a limited timeframe of less than 90 days to implement these changes
With the proposed implementation date of October 1st, 2023, banks are left with less than 90 days to execute these extensive organizational changes, as highlighted by Rajalakshmi Raghu, Head of Strategic Relationships at Manipal Technologies Limited.
Customers are the Real Beneficiaries
Customers stand as the primary beneficiaries of the RBI’s circular, as card issuers will now be required to offer more than one card network and provide the option to choose either during card issuance or at a later stage. Rajalakshmi Raghu further emphasized that apart from the innovative offers from various network providers, there are potential future benefits for customers to explore.
Banks and NBFCs collaborate with authorized card networks to facilitate the issuance of cards. In India, MasterCard and Visa are widely recognized as popular networks. Additionally, other authorized card networks operating in India include American Express Banking Corp, Diners Club International, and the National Payments Corporation of India’s Rupay.