Starting from October 1, 2023, cardholders in India will have the authority to choose their network provider for debit cards, credit cards, and prepaid cards, thanks to a new regulation proposed by the Reserve Bank of India (RBI).
Unlocking Cardholder Choice:
In a significant move, the RBI has mandated that card issuers must provide eligible customers with the freedom to select their preferred card network from a range of options. This choice can be exercised either when the card is initially issued or at a later stage, such as during the renewal process.
The RBI’s draft circular, issued on July 5, 2023, serves as a directive to banks and financial institutions. It calls for the facilitation of multiple card choices for clients, empowering them to pick their favored network provider for their cards. Traditionally, when individuals apply for debit or credit cards, they are not given the option to select their preferred card network.
Breaking Exclusive Agreements:
Most banks typically have exclusive agreements with specific card networks like Visa, Mastercard, or RuPay. Consequently, they issue cards predominantly on their preferred network. Presently, India hosts five prominent card networks, which include American Express Banking Corporation, Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India – RuPay, and Visa Worldwide Limited.
RBI’s Stance:
The RBI’s preliminary proposal emphasizes that approved card networks should collaborate with both banks and non-banking entities to issue debit, credit, and prepaid cards. Currently, the selection of an affiliated network for a customer’s card is primarily determined by the card issuer based on existing agreements between card issuers and card networks.
Recognizing the Need for Change:
Upon thorough evaluation, it has become evident that the existing arrangements between card networks and card issuers, including banks and non-banks, do not adequately cater to customer choice. The RBI’s move aims to rectify this situation and place the decision-making power back into the hands of cardholders.
