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The Reserve Bank of India has issued a new circular that empowers debit, credit, and prepaid card users to select their preferred card network, which challenges the existing practice where card network options are predetermined by agreements between issuers and networks.
What is card network portability?
Card network portability enables consumers to transfer their card accounts from one network to another, similar to how we can switch mobile service providers while retaining the same phone number. With card network portability, cardholders have the flexibility to migrate to a different payment network while keeping their existing card accounts, balances, and credit history intact.
For example, whenever you apply for a debit or credit card, it always has either Visa, Mastercard, Diners Club or RuPay written on it. But you do not get to decide whom you can choose This is because your bank has been choosing your card network provider for you all this while. But this is soon going to change.
RBI noted that the current arrangement existing between card networks and card issuers (banks and non-banks) are not conducive to the availability of choice for customers.
The RBI proposal will make it safer and easier for consumers to access, use and manage credit
This proposed regulation will enhance flexibility and competition in the credit card market, empowering users with the freedom to choose the card network that best suits their preferences.
“The recent RBI regulation seeks to make it safer and easier for consumers to access, use, and manage credit. This rule will put more control in the consumer’s hands, allowing them to choose the payment networks they prefer by allowing customers the freedom to choose their network. The interesting thing here is that the customer can choose not only at the time of the card disbursal but at any time in the future as well,” said Adhil Shetty CEO Bankbazaar.
For instance, a network like RuPay may gain an edge by offering Unified Payments Interface (UPI) services on credit cards, which is currently not offered by other networks.
” We believe a large set of customers is now looking to use their credit cards via UPI. Customers with existing cards are also looking to have this UPI interoperability,” said Adhil Shetty CEO Bankbazaar.
RuPay and UPI are going international. RuPay customers looking to upgrade their cards for international travel may also be able to migrate their card to Visa or Mastercard especially if they’re travelling to destinations where RuPay is yet to be widely accepted.
When can you port your card network?
The RBI has invited opinions from various stakeholders on the draft circular up to August 4, 2023.
Tight timeline for banks
Banks have a tight timeline of less than 90 days to implement these changes, considering the proposed implementation date of October 1st, 2023.
” While this may entail additional compliance and implementation requirements for banks, customers will welcome this step since it would give a lot of leverage to them to choose their preferred network. It will also promote more healthy competition amongst the card network players and is likely to give new age network providers significant advantage as compared to the traditional network providers. From banks perspective, this move will provide them the larger incentive to issue credit cards on UPI and one is likely to see UPI linked credit cards becoming a norm rather than exception,” said Siddharth Srivastava, Partner, Khaitan & Co.
Another significant aspect of the proposed rules is the mandate for card issuers to offer customers the freedom to choose from a diverse selection of card networks during the card issuance process and subsequent transactions.
‘This customer-centric approach allows individuals to align their financial preferences with the specific benefits and features offered by different card networks, ensuring a tailored and personalized experience,” added Gupta.
“This provision aims to strike a balance between fostering healthy competition and maintaining contractual obligations. The potential impact of these proposed reforms is substantial. Users of card networks will enjoy increased access to a wider array of services, rewards, and benefits. With the freedom to select their preferred card network, customers can personalize their financial experience and reap the rewards that best suit their unique requirements,” said Gupta.
Additionally, the intensified competition among card networks is expected to stimulate innovation and drive improvements across the industry.
“Card networks will strive to differentiate themselves by introducing innovative solutions, enhanced customer support, and attractive rewards programs, thereby raising the bar for excellence and service quality,” said Gupta.
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