Customers can now choose from multiple card networks from October 1

From October 1, banks will provide customers the option to choose from multiple card networks like Visa, MasterCard, and Rupay for their debit, credit, and prepaid cards.

On July 5, the Reserve Bank of India (RBI) had released a draft circular on changing the arrangements between card networks and banks and non-bank entities authorised to issue cards.

According to the notification, cards must be issued across more than one network and the issuers must give their customers the option to choose from them.

Customers can exercise the option at the time of the issuance of the card or at any other time. These orders were stated to be effective from October 1.

The RBI also said the card issuers should not enter into any arrangement or agreement with card networks that restrained them from taking the service of other card networks, thereby debarring banks from entering into exclusive contracts with networks.

Sanjeev Moghe, president and head (cards and payments), Axis Bank, said the private sector lender was live on Visa, MasterCard, and Rupay since the first quarter this financial year. He said the impact on the bank from a revenue perspective would be minimal, if any.

According to analysts, banks will have to invest in partnerships and technology to make the options available to customers. This will aid in developing systems and upgrading the existing infrastructure.

“The credit card network portability mandate will require banks to make changes to their business models. For example, you may have a bank offering cards with just one payment network. Now it has to offer cards with a minimum of two networks,” said Adhil Shetty, chief executive officer, Bankbazaar.

“Most large banks are prepared with the technology to support these guidelines and are issuing cards across two or more networks. Others will have to invest in partnerships and technology to make portability happen. This could include developing new systems and processes, as well as upgrading their existing infrastructure and train their staff,” Shetty said.

Some senior banking officials said they had sought clarification from the regulator if this applied to co-branded cards. They are yet to hear from the regulator on the matter.

While most banks offer all the networks to their customers, for co-branded cards, only one particular network is offered.

The RBI circular made it applicable both to existing and fresh agreements between card issuers and network service providers.

Analysts said the step would be beneficial for customers because it would give them greater control of their financial decision and make it more competitive for digital network service providers.

“In order to remain competitive, DNSPs [Digital Network Service Provider] may need to change their rewards programmes to offer better rewards to customers who switch networks. The mandate could create new business opportunities for DNSPs. However, it is likely to lead to some changes in the way that these partnerships operate,” Shetty added.