Credit and Debit Card portability becomes a reality

Credit and Debit Card portability becomes a reality 

RBI issues draft circular through which you can now port your credit and debit cards too

Debit and Credit Card Portability

Customers will be given choice to change their debit, credit or prepaid card networks from October 1, 2023

Exciting news for all card users in India. Starting from October 1, 2023 you will have the power to switch between credit card, debit card, and prepaid card networks, just like you can switch your mobile networks between Vodafone, Jio, and Airtel. This revolutionary move empowers you to take control of your card usage and enjoy the benefits and privileges offered by different networks.  A recent circular issued by the Reserve Bank of India has granted greater authority to debit, credit, and prepaid card users, allowing them to choose their preferred card network. This move challenges the current practice where card network options are predetermined based on agreements between issuers and networks.

Card Network Portability

In a significant development, the Reserve Bank of India has introduced card network portability, granting consumers the ability to transfer their card accounts from one network to another. This new provision resembles the process of switching mobile service providers while maintaining the same phone number. With the introduction of card network portability, cardholders now have the freedom to migrate to a different payment network while preserving their existing card accounts, balances, and credit history. It is important to note that traditionally, when applying for a debit or credit card, consumers were not given the option to choose the network provider as it was determined solely by the card issuer.

In a draft released by RBI, card issuers would be prohibited from entering into any agreement with card networks that restrain them from availing the services of other cards. RBI said 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. 

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.

“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.” - The Draft circular. 

"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

One way for a network such as RuPay to gain a competitive advantage is by providing Unified Payments Interface (UPI) services on their credit cards, a feature that is currently not available on 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.

As RuPay and UPI expand their reach internationally, customers of RuPay who are planning to travel abroad may have the option to upgrade their cards to Visa or Mastercard. This is particularly beneficial when travelling to destinations where RuPay cards are not yet widely accepted.

The option of card network portability will be incorporated into existing agreements or during the renewal process, as well as in new agreements executed from the date specified in the circular. The Reserve Bank of India (RBI) has extended an invitation for opinions from different stakeholders regarding the draft circular until August 4, 2023.Banks are facing a tight timeline of less than 90 days to implement these changes, as the proposed implementation date is set for October 1, 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 advantages as compared to the traditional network providers. From the  bank’s 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 an exception," said Siddharth Srivastava, Partner, Khaitan & Co.

Source: Business Standard

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