The Reserve Bank of India (RBI) has unveiled a draft regulation that grants debit, credit, and prepaid cardholders the authority to select their desired card network, marking a potentially revolutionary development on a global scale. This regulation challenges the prevailing practice where card network options are predetermined through agreements between issuers and networks.
As per the draft circular issued by the RBI, card issuers will be prohibited from entering into any arrangement or agreement with card networks that restricts them from accessing the services of other card networks. The RBI stated that the current arrangements between card networks and card issuers, be it banks or non-banking institutions, do not promote customer choice and availability. This proposed regulation aims to enhance flexibility and competition in the credit card market, empowering users with the freedom to choose the card network that best suits their preferences and requirements.
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.
RBI card network portability proposal: Banks may face operational challenges
While this draft holds significant advantages for customers, granting them decision-making authority and portability, banks may face operational challenges and increased costs. “They will need to review existing agreements, establish new partnerships, adjust their customer onboarding processes, plan additional training, and relook at customer profiling. The impact on the manufacturing process of all banking cards is something to be evaluated in the coming few months,” said Anadurjay Talukdar.
Banks have less than 90 days to implement these changes
Rajalakshmi Raghu, Head of Strategic Relationships at Manipal Technologies Limited, pointed out that banks are faced with a tight timeline of less than 90 days to implement the extensive organizational changes, considering the proposed implementation date of October 1st, 2023.
RBI circular on card network choice: Customers are the real beneficiaries
Customers emerge as the primary beneficiaries under the new regulations, as card issuers will now be obligated to offer more than one card network and provide the option for customers to choose their preferred network during card issuance or even afterwards. Additionally, apart from the potential for innovative offerings by different network providers, there are broader advantages for customers that will become apparent in the future.
In India, authorized card networks, such as MasterCard and Visa, partner with banks and non-banking financial institutions (NBFCs) for card issuance. Other authorized card networks in India include American Express Banking Corp, Diners Club International, and National Payments Corporation of India – Rupay.
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