RBI’s New Card Network Rule Benefits RuPay

Bankers who are in the know have informed us that the local RuPay card network may well get a boost as a result of the fact that credit card portability is now a reality. According to the Reserve Bank of India, beginning September 6, individuals who have credit cards in India will have the ability to freely choose the card network that they wish to use.

In a circular that was distributed on Wednesday, the Indian banking regulator stated that the bank will provide options to new customers and that existing cardholders will have the opportunity to select one of these options when it comes time to renew their cards. It is important to note that the restriction is only relevant to lenders that have more than 10 lakh credit cards that are currently active.

“If you push RuPay, the earnings out of processing transactions would remain in the country,” said Vijay Jasuja, who had previously served as the managing director and chief executive officer of SBI Card and Payment Services Pvt. Ltd. According to him, “in the beginning, there was a problem with acceptance for RuPay internationally,” but it appears that this is beginning to change.

Several payment networks around the world, including Discover Financial Services, UnionPay, Pulse, JCB, and Diners Club Foreign, are compatible with the RuPay credit card, which means that it may be used for foreign transactions at any point-of-sale (POS), automated teller machine (ATM), and online shopping website.

The majority of countries accept payments made through networks such as Discover Financial Services, JCB, and Diners Club International, even though Visa has a greater number of accepted merchant locations.

However, RuPay does not have its infrastructure anywhere in the world. Consequently, RuPay cards may be used for transactions that are completely seamless anywhere the partner cards are accepted, according to Ankush Dixit, the founder and CEO of Multiply, who spoke with NDTV Profit.

According to Dixit, one additional advantage that is available to those who have a RuPay card is the ability to make payments through the Unified Payments Interface. Currently, Indians can utilize the Unified Payments Interface (UPI) to make payments in seven other countries, including Sri Lanka, Mauritius, France, the United Arab Emirates, Singapore, Bhutan, and Nepal. This is an overlay for worldwide acceptability.

“NPCI and RBI are trying to cash in on huge volumes of UPI transactions in comparison to credit card and debit cards (payments),” Dixit told reporters. “I think they have deliberately not enabled Visa and Mastercard on UPI and it won't happen for some time because they want to give a lead to RuPay,” said the representative.

Despite this, it is not going to be a smooth sailing experience for RuPay either. According to Dixit, for RuPay to achieve its goal of attracting Visa and Mastercard cardholders, the company will need to form relationships with high-end products and services to provide competitive incentives.

For the Benefit of the Customers

According to Adhil Shetty, the Chief Executive Officer of Bank Bazaar, the client is the one who benefits the most from the ongoing preparations for the transformation.

Shetty stated that RuPay will receive “incrementality,” which would mean that customers would now have the opportunity to switch networks, even to RuPay, where they would have UPI compatibility.

It's a win-win situation for everyone involved, including customers, card issuers, and businesses. He stated that there are over fifty million merchants who merely have a QR code and no point-of-sale terminals; they are now able to begin accepting RuPay cards.

However, there is a slight catch. According to Dixit, the transition from one card network to another would be contingent on the range of benefits that each network provides.

This does not necessarily mean that a client can take advantage of the same premium benefits on Visa or Mastercard if they switch to RuPay cards, even though the Reserve Bank of India has made it possible for consumers to have a choice. According to him, it would be excessively costly for Bank of Baroda, for instance, to introduce Visa or Mastercard for customers who make low-value purchases.

Banks are averse to higher costs.

Significant financial institutions have already established partnerships with several card networks, including Visa, Mastercard, and RuPay, among others. According to the monthly data releases issued by the Reserve Bank of India (RBI), HDFC Bank Ltd., SBI Card, ICICI Bank Ltd., and Axis Bank Ltd. makeup seventy percent of the market share for credit cards.

Although these various tie-ups cover a lot of card varieties, they don't cover everything.

One example is the fact that Axis Bank, in collaboration with Indian Oil Corporation, offers a single co-branded credit card on the RuPay platform. Within the RuPay platform, HDFC Bank offers two generic credit cards in addition to four co-branded cards. The RuPay network is the primary focus of the credit card offerings made available by Bank of Baroda.

In addition, RBL Bank has established partnerships with both Visa and Mastercard. On the other hand, the private lender is reportedly preparing to provide RuPay credit cards within the next two months, as stated by the previously mentioned individual. The people who were interviewed stated that this would be difficult to do due to the high operational costs and the significant implementation issues.

According to the first individual, to facilitate what is required by the circular issued by the RBI, adjustments would need to be made to the technological infrastructure and contact with clients.

According to the statement, lenders are currently in the process of requesting clarifications from the regulatory body about whether or not all card variants are required to be facilitated on different networks. Additionally, information regarding pre-existing co-branded partnerships, which are associated exclusively with particular card networks, is being sought.

As a result of the fact that the RBI rules are anticipated to provide an impetus to the RuPay network, Jasuja believes that global financial institutions can enter the RuPay credit card market. According to what he mentioned, those who are in the industry of selling credit cards in India might be required to include RuPay cards in their arrangements. “Underlying benefit to RuPay is more than what meets the eye.”

Standard Chartered Bank is the sole foreign lender that falls under the ambit of the RBI's circular as of January, according to the data provided by the Reserve Bank of India (RBI).

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