Visa, MasterCard or RuPay? Soon, you'll get to choose your network

The central bank has decided to give consumers the power to choose between card networks such as Visa or Mastercard, among others, when a new credit card is issued. Existing credit cards, too, can be moved to a different network of the consumer's choice when they come up for renewal.

The new policy will become effective in September, six months from Wednesday, 6 March, when the guideline was issued.

On Wednesday, the Reserve Bank of India (RBI) restricted credit card issuers (such as banks) from making exclusive arrangements with card networks that bar them from tapping rival networks.

RBI had first proposed this move in July 2023, but at that time it had also called for restrictions on debit and prepaid cards. The final guideline on Wednesday is applicable only to credit cards.

According to the banking regulator, the choice of the network whose card a customer gets is decided by the card issuer based on arrangements banks have with the networks. The regulator said it has found that some arrangements between card networks and issuers are “not conducive to the availability of choice for customers”.

Banks and non-banks typically partner with card networks for issuance of credit cards. Such networks include American Express Banking Corp, Diners Club International Ltd, MasterCard Asia/ Pacific Pte Ltd, National Payments Corporation of India–RuPay, and Visa Worldwide Pte Ltd. 

The central bank’s new guideline will not be applicable to credit card issuers that have up to 1 million outstanding cards, which is a small sliver of the market.

Banks with more than 1 million outstanding cards—13 banks of 34 that issue credit cards—comprise 92% of the credit card universe. Of these 13, HFDC Bank, SBI Card, ICICI Bank and Axis Bank have nearly 70% share, showed an analysis by financial services marketplace Bankbazaar.com.

“We have seen the latest RBI circular on arrangements with multiple card networks for issuance of credit cards. We support the regulator’s efforts at enhancing choice for cardholders,” said a spokesperson for Mastercard. Emails sent to Visa and American Express remained unanswered till press time.

Industry experts do not see this guideline affecting banks much. Adhil Shetty, chief executive officer of BankBazaar.com, said since most banks already have tie-ups with all three card networks, they should not have a problem in allowing customers to select their preferred card network at the time of issue.

Shetty also said this development should be seen in conjunction with the integration of RuPay payments with UPI (unified payments interface). He said a large set of customers is interested in using credit cards through UPI, including those who already have credit cards and desire UPI interoperability.

In June 2022, RBI approved the use of RuPay credit cards on UPI, a facility its rival card networks still do not have access to. This allows RuPay card holders to use UPI facility to make payments to the wide network of shops and other businesses that accept India’s homegrown fast payments platform.

That said, this RBI directive will also allow eligible RuPay card holders to add cards affiliated to global networks for usage abroad.

“RuPay and UPI are going international, albeit at a slower pace. 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,” said Shetty.

Others also believe this move allows greater choice to customers, instead of banks deciding on their behalf.

“Consumers are, without a doubt, getting more selective about the card network they would like to be on, and the quick development of UPI is a significant factor that is contributing to this trend,” said Jitendra Dhaka, founder of BankSathi, a platform with information on various banking products and services.

Considering that almost eight out of 10 people are already using UPI for their transactions, Dhaka said, it is not surprising to find an increasing preference for RuPay among customers. “Additionally, offering a diverse range of card options enhances the bank's competitive edge in the market and positions it as more attuned to the evolving preferences of its customer base,” he said.