Starting October 1, Indian customers using credit, debit, and prepaid cards will be free to switch their card networks between Visa, MasterCard, RuPay, etc., and vice versa, similar to mobile network portability between Vodafone, Jio, and Airtel.
The facility, announced in a recent RBI circular, aims to empower card users to select their preferred network. It challenges the current practice of agreements between issuers and networks predetermining network options. As such, when applying for a card, users had no say in choosing the network provider as the issuer decided it.
Authorised card networks in India include American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India's RuPay, and Visa Worldwide Pte. Ltd. However, users were not free to choose among them until now.
What Is Card Network Portability?
Card network portability refers to the ability of cardholders to choose their desired network provider for their debit or credit cards. The RBI recognises that the existing arrangement between card networks and issuers does not offer customers enough choices. In a July 5, 2023 draft circular, the central bank directed card issuers, including banks and finance companies, to provide customers with multiple network options.
The RBI proposal aims to make credit card usage safer and more convenient for consumers. By allowing customers to select the network, the regulation enhances flexibility and competition in the market.
Says Pratyush Miglani, Managing Partner, MVAC Advocates & Consultants: “Card portability not only enhances competition among payment networks, fosters innovation and drives down prices but also streamlines account management for customers. With the ability to switch between networks like Visa, Rupay, and others, customers can now choose services that align with their needs, enjoying attractive incentives, rewards, and competitive pricing offered by competing networks. This flexibility allows customers to consolidate their cards into a single network or switch between networks as required, resulting in a more convenient and efficient banking experience while maximising the value they receive.”
Benefits For Consumers
The ability to switch card networks offers several advantages to consumers. Adhil Shetty, CEO of BankBazaar.com, highlights that many customers are interested in using their credit cards through UPI (Unified Payments Interface), especially those who already have credit cards and desire UPI interoperability. The integration of RuPay payments with UPI will particularly appeal to these customers.
Additionally, RuPay customers seeking to upgrade their cards for international travel may now migrate their card to Visa or Mastercard, especially if they travel to destinations where RuPay is not widely accepted.
When Can You Port Your Card Network?
Card network portability can be exercised during the issuance of new cards, at the time of renewal, or in fresh agreements executed after the circular date. The RBI has invited opinions from various stakeholders on the draft circular until August 4, 2023.
Tight Timeline For Banks
Banks face a tight timeline of less than 90 days to implement these changes, with the proposed implementation date set for October 1st, 2023. It requires banks to include the card network portability option in existing agreements or during renewal or the execution of new contracts.
Competition And Innovation
By targeting existing agreements between card networks and issuers, the RBI aims to foster a more competitive environment that better meets customers' evolving needs and expectations. Removing limitations encourages collaboration between card issuers and multiple networks, enhancing user services and benefits.
The proposed rules also mandate card issuers to allow customers to choose from various card networks during the card issuance process and subsequent transactions. This customer-centric approach will enable individuals to align their financial preferences with the specific benefits and features offered by different card networks, resulting in a tailored and personalised experience.
Furthermore, increased competition among card networks is expected to drive innovation and improvements across the industry. Networks will strive to differentiate themselves by introducing innovative solutions, enhanced customer support, and attractive rewards programs, ultimately raising the bar for excellence and service quality.
Prohibition Of Restrictive Agreements
One key provision in the RBI's proposal is the prohibition of agreements restricting card issuers from utilising the services of other card networks. This ensures greater
flexibility and access for consumers, similar to the wide range of network options telecommunications operators provide.
Positive Change For Consumers
Suvigya Awasthy, Partner at PSL Advocates & Solicitors, praises the RBI's circular, stating that it signifies a positive change for consumers in the banking market. "Cardholders will now have the liberty to select their desired network provider for their debit and credit cards, similar to the network services provided by telecommunications operators. This change allows for greater flexibility and easier credit management, resolving obstacles consumers face during international travel," he says.
"Several consumers face obstacles whilst travelling to an international destination concerning payments through debit or credit cards. However, given the option to select from the network of cards, these persistent issues are likely to be ameliorated. The banks will be required to act on a war-footing basis considering the timelines stipulated by the RBI since implementing the new guidelines will entail additional compliance and extensive due diligence. At the same time, the guidelines of the RBI will promote healthy competition between different card networks. One of the most attractive features will be the linkage of Unified Payments Interface (''UPI'') and the credit cards likely to become the most preferred payment mechanism moving forward," he adds.
Banks must promptly comply with the RBI's guidelines, which require additional compliance and due diligence. These guidelines will promote healthy competition between different card networks, with the integration of the Unified Payments Interface (UPI) and credit cards becoming a preferred payment mechanism in the future
