RBI credit card portability- Draft Circular

The word portability has created quite a stir in the Indian financial system, as it is a term that means, moving from one mobile network to another is an effortless process for the customer without any change to the phone number they hold.

Likewise, RBI’s latest draft guidelines refer to this term, where the common man now has the power to port between the five major networks operating in India; Visa, MasterCard, RuPay, Amex, and Diners.

Recap of the portability draft guideline:

Name: Draft Circular — Arrangements with Card Networks for issue of Debit, Credit and Prepaid Cards

Date Released: July 05, 2023

Date Effective: October 01,2023

Highlights:

• Issuers (Banks and Non-Banking entities) shall not enter into any agreement or arrangement with card networks that restrict them working with other card networks
• Issuers shall issue cards to their customers from multiple card networks
• Issuers shall provide the portability option to their eligible existing customers. This option should be available during card issuance or when the customer chooses.

Out these three highlights, number 2 and 3 are effective from October 01, 2023. Also, RBI has invited comments and feedback on this circular till August 4th , 2023.

How will these highlights be available to the customer?

• By amending the existing agreements or during the renewal process
• By entering into fresh agreements with the card network

Now, let’s talk the ground realities that prompted this initiative and the challenges that will be faced by card issuers while embracing this initiative;

While this convenience of choosing their preferred network is not much of a challenge for the new customer, so is not the case with an existing customer. In short, RBI is of the view that the existing arrangements are not conducive to the interests of the cardholders, and they need to have access to more choices. Furthermore, it has always been the issuer who decides the card network for the customer. And the customer has no other choice but to accept. This case of missing convenience and choices prompted RBI to step in.

The pre-defined network-based card issuance spells out trouble for the customer as they might not get the card offers suitable to their lifestyle. So, most of the time, we come across individuals holding multiple cards just for the privileges offered by that bank and card-network tie-up leading to missed payments and defaults. Also, on the customer side, it is quite a pain to keep track of these many cards.

Now, coming to the operational challenges that await card issuers are quite exhausting. They need to revisit their entire existing agreements and remove any binding clauses or must enter into new agreements that offer a beneficial path to the customer.

As this draft circular also specifies that the customer should be able to gauge benefits offered by every card network and choose accordingly, there will be quite a number of challenges that a card issuer has to overcome.

Technically, the card issuer has to be ready to work with multiple bins and that itself is a task on its own as it requires certifications and operational readiness. In case the card issuer has multiple tie-ups, it won’t be much of a challenge. When gauging partnerships between card issuers, merchants and networks, what awaits in store is a whole dynamic shift. No more the tag of owning a partnership based specific privilege as networks would have to compete against each other to give the best offers to retain customers.

As for the UPI angle this circular is beneficial for boosting the adoption of RuPay, the native card network as it is the only one for credit card payments via UPI.

While draft circular has created quite a stir, it is still wait and watch game to see how people adapt and embrace this initiative and what kind of cards will be curated to stay ahead in the game.

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