Card Network Portability

The stakeholders are expected to submit their feedback^{RBI Invitation for Comments} by August 4^th, 2023 against the draft circular on Arrangements with Card Networks for issue of Debit, Credit and Prepaid Cards proposed by The Reserve Bank of India (RBI) on July 05^th, 2023.

From October 1^st, 2023, credit card, debit card and prepaid card customers will be able to port their networks. For example, card users would be able to port from Visa to MasterCard to RuPay or to any other network or vice-versa as per their choice.

What did RBI propose?

The draft proposal also restrains card issuers from entering into any arrangement or agreement that limits card issuers’ ability to tie up with other card networks.

What is the current card setup?

Currently, there are five authorised card networks in India viz. American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/ Pacific Pte. Ltd., National Payments Corporation of India – Rupay, and Visa Worldwide Pte. Limited. The affiliated network branded as American Express, Diners Club International, Mastercard, RuPay or Visa is displayed on the card.

The authorised card networks tie-up with banks / non-banks for issuance of debit / credit / prepaid cards. The choice of affiliated network for a card issued to a customer is decided by the card issuer and is linked to the arrangements that the card issuers have with card networks in terms of their bilateral agreements.

When the RBI’s proposal comes into effect from October 1, card users will have the choice of porting their cards from one network to another.

Why did RBI propose changes?

Authorised card networks currently tie up with banks/non-banks for the issuance of debit, prepaid and credit cards. However, the choice of affiliated network for a card is decided by the card issuer. This choice is also linked to the arrangements that the card issuers have with the card network.

However, as per RBI’s circular, such arrangements between card issuers and networks do not provide freedom of choice to customers.

“On a review, it is observed that arrangements existing between card networks and card issuers (banks and non-banks) are not conducive to the availability of choice for customers,” RBI said in the draft circular.

What has been proposed?

The central bank has found that it is “necessary and expedient, in the interest of payment system and public interest, to do so” to provide more choices to customers. Accordingly, the RBI has made the following proposals in the draft circular.

1. Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.
2. Card issuers shall issue cards across more than one card network.
3. Card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks. This option may be exercised by customers either at the time of issue or at any subsequent time.
4. These instructions, as above, shall come into effect from October 1^st, 2023.

“Card issuers and card networks should ensure to adhere to these requirements in existing agreements at the time of amendment or renewal and fresh agreements executed from the date of the RBI circular,” the notification said.

When can a customer port between card networks?

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 said that card issuers and card networks shall ensure to adhere to the above requirements in:

1. Existing agreements at the time of amendment or renewal thereof, and
2. Fresh agreements executed from the date of this circular.
3. The option may be exercised by customers either at the time of issuing, or later.
4. These instructions, points 1 & 2, shall come into effect from October 1^st, 2023.

The Bottom Line

According to RBI, when banks tie up with card networks to offer their services, customers don’t have a choice to choose these offerings. The central bank has noted that some banks have been asking customers to accept particular card networks, which they might not prefer.

Given below are some transformations which can be seen in times to come after the introduction of customer's priority in choosing the card network:

1. Bring wider choice of card network to the customers.
2. Trigger competition competition among international and domestic card network companies.
3. Reduce dependencies on International Card Network companies.
4. Customer pain points like high interest rates, poor grievance redressal systems/processes and lack of transparency in charges or rewards will get addressed.
5. Exclusive co-branded card issuance arrangements between card networks and card issuers would be impacted.

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