Starting 1st October 2023, card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks
The Circular:
On July 5th, the RBI has drafted a circular which mentions the issuing of cards on more than one card-network. Card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks. This is going to be activated from 1st October 2023 and will be applicable for both – new and existing card customers.
Who are the Authorised Card-Network Providers?
Authorised card networks in India are: American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India – Rupay, and Visa Worldwide Pte. Limited. These affiliated networks branded as American Express, Diners Club International, Mastercard, RuPay or Visa are displayed on the card.
The Decoding:
Banks usually issue credit cards to customers in association with card networks. Visa/Mastercard is the network while the bank is the card issuer. This circular can be envisaged as a move to enable customer choice and flexibility. Customers are usually not aware of the different affiliate networks and this circular has highlighted the need of one.
Let us explore more facts:
1. Mastercard, Visa Control and Diners Club control about 75% of the credit card affiliate networks.
2. Rupay is a recent, home-grown foray into the affiliate market, launched by NCPI along with UPI which could gain a levelling field.
3. Last year during the Russian-Ukraine crisis, Visa, Mastercard and American Express had announced that they will suspend all operations in Russia in protest of its invasion of Ukraine. This had caused issues for the businesses and for travelers who relied on credit card payments for transactions.
4. The recent credit card usage in India has increased and there are now a whopping 73 million users according to a report in 2022.
5. More players will lead to more competitive transaction cost pricing, in due course.
Kotak Mahindra bank’s view on this circular:
Frederick Dsouza, Business Head – Credit Cards, Kotak Mahindra Bank Ltd says, “Kotak Mahindra Bank actively markets credit cards from all the major networks. Our customers also have the flexibility to switch from one card to another as they deem fit. We have been an active issuer of Rupay cards and are amongst the issuers offering UPI on credit card facility to our customers. We are already seeing a good adoption of this facility.”
Inferences:
This circular is a welcome move to enable additional network affiliation for customers and enable businesses to function smoothly in case of any crisis. It can be a game changer for RuPay and enable the “Atmanirbhar Bharat” initiative.
