How Customers Can Choose Preferred Credit Card Network?

The Reserve Bank of India suggested on Wednesday that card issuers, including banks and non-banks, should provide their consumers the choice to select the card network.
For the issuance of debit, credit, or prepaid cards, authorised card networks collaborate with banks and non-banks.

Currently, the decision to choose an affiliated network for a card issued to a client is made by the card issuer and is dependent upon the arrangements made by the card issuers with card networks under their bilateral agreements.

What RBI draft circular proposed?

The RBI has proposed that, as of October 1, credit card issuers must permit customers to select their preferred network. Card users can switch between networks.

Five credit card networks are currently available to Indian customers: Visa, MasterCard, RuPay, American Express, and Diner's Club. Customers are free to switch to any network as of October 1.

The RBI's draft circular forbade card issuers from signing contracts that would restrict their capacity to collaborate with alternative card networks.
Customers may exercise that choice at the time of issuance or at a later period, according to the RBI.

The RBI stated that feedback from stakeholders is required by August 4 and that these changes will go into effect on October 1.

What is its importance?

Credit card balances dramatically rose in FY23 in India. Data from the RBI shows that credit card debt has climbed to Rs 2 lakh crore, up 29.7% over the prior year. Banks had produced 8.65 crore credit cards by the beginning of April 2023.
In April 2023, credit card payments would increase to a record high of Rs 1.32 lakh crore, from the current monthly average of about Rs 1 lakh crore.
The ability of the user to choose the card network at their leisure can stimulate the market and heighten competition between domestic and international network providers.

What are the expected changes?

• The RBI claims that when banks partner with card networks to offer their services, clients are unable to select these options.
• The central bank has taken note of some banks' requests for specific card networks, which some customers may not favour.
• Due to noncompliance with local data storage regulations, the RBI permanently prohibited Mastercard, American Express, and Diners Club from issuing new debit, credit, or prepaid cards to clients in 2021.
• Later in June 2022, after the central bank had verified that the corporation was adhering to the rules regarding the keeping of payment data, the restriction was lifted.

How to change card networks from one to another?

The card network portability option will be a part of all new agreements that are signed after the date of the circular or at the time of their renewal, in accordance with the RBI's suggested standards.
The RBI stated that the following procedures must be followed by card issuers and card networks: New agreements must be signed after the date of this circular and Existing agreements must be amended or renewed at the time of amendment.