With its latest circular on cards networks, the Reserve Bank of India (RBI) has opened the doors to greater customer choice for credit and debit card users.
The RBI issued a circular on March 6 forbidding card issuers, that is, banks and non-banks, from entering into agreements with card networks that restrict them from using the services of other card networks.
Card payment networks comprise Visa and Mastercard, the two most widely use networks globally, and others such as American Express, Diners Club International and RuPay. RuPay is India’s indigenous card payment network developed by the National Payments Corporation of India (NPCI).
The central bank wants banks / non-banks to give their customers the choice to pick from multiple card networks when the card is issued to them. Existing customers are to be given this choice at the time of renewal of their card. However, credit card issuers with only up to 10 lakh active cards issued have been exempt from having to provide this choice.
The circular will take effect from September 6, 2024.
Note that, as per the circular, “card issuers who issue credit cards on their own authorised card network (in other words, those who have their own card network) are excluded from the applicability of the circular”. This applies to American Express Banking Corp., which will not be required to issue it credit cards on card networks other than its own.
What it means for cardholders
Today, when a bank issues its customers a credit or debit card, it may be offered on the Visa or Mastercard or even other networks. Certain card variants may also be offered on multiple card networks. For example, HDFC Bank’s Infinia credit card is offered both on the Visa and Mastercard networks. The bank’s Millennia credit card is offered on four card networks – Visa, Mastercard, Diners and RuPay.
Talking about how things work currently, Sumanta Mandal, founder of TechnoFino, a platform that reviews debit and credit cards says that once a decision has been made on what card to issue to a customer, the bank randomly assigns the card network from those available for that card variant.
“But after this circular takes effect, banks will have to give customers the option to choose the card network from the ones available for the card issued to them,” says Mandal. In other words, if your bank issues you a card on Mastercard but you want a Visa card instead, or vice-versa, you will now be given this choice provided the bank offers that card on both these networks.
Even though customers can always benefit from greater choice, it helps to remember that card benefits are largely a function of the card variant, rather than the card network that has been chosen. “In most cases there is not much difference between a particular card variant issued on different networks. But there are some network-specific offers that give you access to golf courses and clubs that you can enjoy only if you have been issued a card on that network,” says Mandal.
As an example, Mandal points to the HDFC Millennia credit card. If this card is issued on the Mastercard network, you get complimentary golf course access. If you have been issued this card on another network, you will miss out on this benefit.
Similarly, the IndusInd Bank Pioneer Heritage credit card when issued on the Mastercard World Elite network offers the benefit of unlimited expiry on Club ITC Culinaire green points, if you are part of ITC Hotels’ loyalty programme. These points otherwise come with 12 months’ validity only. One can also get two 50 percent discount vouchers for dinner for four at ITC Hotels, among other benefits.
Pushing RuPay card adoption
While this may not be an objective for the RBI, this circular is also expected to boost the adoption of the home-grown RuPay card network. As per RBI data, RuPay credit cards had a market share of only 3 percent as of January 2022. RuPay debit cards, however, have a dominant presence with 65 percent market share.
With card issuers having to explicitly offer a choice of card network to customers, it is possible that many may opt for RuPay.
But there are two points worth noting. In the context of RuPay credit cards, Mandal says, “A Visa or a Mastercard credit card is likely to offer you a better credit card rewards programme compared to a RuPay credit card.”
In short, despite the choice, customers may not opt for a RuPay credit card. But at least customers now have a choice.
That said, Mandal offers a different view on RuPay debit cards. “The RuPay Select card (one of the card variants) can be a good choice as it offers some very good benefits at a reasonable cost. The benefits include complimentary preventive health check-ups, spa services, etc., and even personal accident insurance and permanent disability cover of up to Rs 10 lakh. Other cards do not offer such benefits,” he adds.
Another big drawback of RuPay cards is their lower acceptance ratio for transactions outside India. Currently, thanks to NPCI’s tie-ups with several countries, RuPay cards are currently accepted in Bhutan, Nepal, Mauritius, Singapore and the UAE. This list is likely to expand to include more countries over time.
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