Visa to Rupay: From October 1, you can port your credit, debit cards too

Don't want to miss the best from Business Standard?

From 1 October,  all credit card, debit card and prepaid card customers in India will be able to port their networks. Just as you can port  your mobile networks between Vodafone, Jio and Airtel, now card users would be able to port from Visa to MasterCard to RuPay or any other network or vice-versa of their choice.

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.

Currently, when you apply for a debit or credit card, you usually don't get to choose the network provider as it is decided by the card issuer. 

 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.

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.

In a draft circular released on July 5, 2023, the central bank has asked the card issuers i.e., banks and finance companies to allow customers to have more than one card option and allow them to opt for their desired network provider for their cards.

It has also asked the card issuers to provide an option to their eligible customers to pick any one among the multiple card networks. The central bank added that the option may be exercised by customers either at the time of issue or at any subsequent time. RBI has also  restrained card issuers from entering into agreements that limit their ability to tie-up with other card-networks.

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.

Advantage UPI
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.

“Traditionally, consumer choice in cards in India has rarely been network-driven. Unlike in markets like the US, choice has been driven by issuer and core value proposition. The RBI proposal is an important step, as it will provide more choice to consumers, while ending exclusive issuer agreements it has made Card networks with major issuers This will provide banks with a much-needed incentive to issue credit cards on UPI, as it is clearly the strongest offering on the credit side of the Rupay network On the debit side, most of the issuance volume is currently on Rupay and most PSUs issue RuPay cards exclusively Default,” said Ranadurjay Talukdar, Partner and Payments Sector Leader at EY India.

" 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 card network portability option will be included in existing agreements or at the time of renewal or in fresh agreements executed from the date of the circular.

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.

RBI target existing agreements between card networks and issuers, which often fall short in meeting customers' evolving needs and expectations

One of the key provisions in the RBI's proposal is the prohibition of agreements that restrict card issuers from utilizing the services of other card networks. "By removing these limitations, the RBI seeks to foster a more competitive environment where card issuers can collaborate with multiple networks, leading to enhanced services and benefits for users," said  Amit Gupta, MD, Sag Infotech.

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.

Moreover, the RBI's proposal places the responsibility of adhering to existing agreements during amendment or renewal processes on the card issuers and card networks.

"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.

Competition will result in innovation
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.