Visa, RuPay, Mastercard? You'll soon have power to choose

New Delhi: The Reserve Bank of India said on Wednesday that credit card customers will have the freedom to choose their card payment network -- be it Visa, Mastercard, American Express or homegrown RuPay.

This will come into effect from September 6, the RBI said in a circular, adding that banks and other financial institutions should not enter into any arrangement or agreement with card companies that limits customers’ options. Currently, banks or non-banking financial companies (NBFCs) decide on the card payment network based on their bilateral agreements without taking any input from the customers.

“Card issuers shall provide an option to their eligible customers to choose from multiple card networks at the time of issue. For existing cardholders, this option may be provided at the time of the next renewal,” the RBI noted in its circular addressed to heads of authorised payment system providers and participants including banks and NBFCs.

“Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks,” the RBI said.

The RBI’s new direction, however, will not apply to credit card issuers with the number of active cards issued being 10 lakh or less. It also excludes card issuers who issue on their own authorised card network.

Visa and Mastercard are the two most widely used card networks globally, while RuPay is an Indian card network developed by the National Payments Corporation of India. Other card networks authorised by the RBI are American Express and Diners Club International.

Brands like Visa, Mastercard and RuPay don’t offer credit cards of their own. They are issued through co-branded relationships with banks and other financial institutions. For example, if ICICI Bank has a bilateral agreement with Visa, the card will be co-branded as ICICI Bank-Visa card.

In its circular, the RBI noted that “some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers”.

The move will benefit customers, who can choose which card company they would like to take their credit cards from, based on various schemes and discounts being offered like shopping, dining, entertainment or airport lounges.

It will also compel card companies to change their strategies to attract customers, instead of just depending upon their existing agreements with banks and NBFCs.

While the credit facility is offered by the card issuing bank or NBFCs, card networks work silently in the background when customers swipe or tap their cards to make a payment. A card network connects the issuing bank, merchants and the customer to make transactions possible.

According to the RBI data, the number of outstanding credit cards stood at 9.79 crore as of December 2023. Out of these, 1.67 crore cards were issued during the 2023 calendar year.

Over 70% of credit cards in India are issued by four banks – HDFC Bank, State Bank of India, ICICI Bank and Axis Bank. HDFC Bank leads the credit card market with close to two crore cards in circulation, closely followed by SBI with 1.84 crore cards.