RBI New Proposed Guidelines for Card Networks: Empowering Customers and Promoting Choice in Card Networks

[Akashgore10]

Indeed this is a wonderful posts and explains things very clearly. I had understood this though, but this post gives much more clarity to me. However, I am still a little too dumb to understand the point of this. How are the two scenarios different - 1) Bank offers card A on VISA and RUPAY variants and customer can choose either variant; 2) Bank offers card A on VISA and card B on RUPAY and customer can choose either card? Assuming that the customer is smart enough to understand the difference being offered on both variants, he will also be smart enough to understand the difference in both the cards, and so can make a judicious choice in either case. And if all offerings are exactly the same, no matter what choice the customer makes it will make no difference.

The difference will be the offerings and benefits provided by the network such as no of lounge access, Bookmyshow discounts etc. This will be a major factor in deciding which variant to choose

 

[SSV]

Indeed this is a wonderful posts and explains things very clearly. I had understood this though, but this post gives much more clarity to me. However, I am still a little too dumb to understand the point of this. How are the two scenarios different - 1) Bank offers card A on VISA and RUPAY variants and customer can choose either variant; 2) Bank offers card A on VISA and card B on RUPAY and customer can choose either card? Assuming that the customer is smart enough to understand the difference being offered on both variants, he will also be smart enough to understand the difference in both the cards, and so can make a judicious choice in either case. And if all offerings are exactly the same, no matter what choice the customer makes it will make no difference.

To be honest, I didn't understand your confusion... I am very much confused about your confusion...😕😉🙂 , take it easy...
Only two things have changed from these guidelines:
1) A network provider can not restrict the issuer to tie up with them only ( its at the banks discretion to opt two or more networks... Banks may still can choose to be only one network if they want to be..

2) Customer's request to choose their desired network (IF and IF only the card is provided in two or more than two network variants).

Other than the above two everything else remains the same...

okay let me dissect your confusion...
Scanario 1)

Bank offers card A on VISA and RUPAY variants and customer can choose either variant

Say Bank1 issue Card A on Visa and Rupay...
use case 1..
If VISA Card A is used at an international location, there won't be any issue.. at the same time if Rupay Card A is used at an overseas location , it may not be accepted.. So in this scenario , a customer most likely opt for VISA Card A.
Use Case 2..
If a customer's spends are mainly domestic spends and want to use this for UPI spends then his obvious choice is RUPAY Card A over VISA Card A..
What is currently happening is: When both VISA and RUPAY Card A variants are available, the bank is not honouring the customers request of their choice and forcing them to use a card which is aganist their preference...
These guidelines provide a certainity to assure the customers choice be honoured and Banks can't deny thier request.
Very Very key point here is , this never forces a Bank to isuse the card on more than two networks in the first place...I t is completely upto the Bank whether to issue Card A on one , two or three networks..

Scenario 2:

2) Bank offers card A on VISA and card B on RUPAY and customer can choose either card?

Here is my confusion about your confusion...
In the above case, both cards are different with different feautures on two different networks. so we can't compare between these two cards.
And also Scenario1 and 2 also can't be compared because they are not apple to apple comparision...

And coming to your main confusion( I suppose I got it right this time around)..
You are thinking Rupay will drag down both Visa and Master to their low level of quality because of backing of Govt's big muscle... It will most probably not happen in a democratic and capitalist econemies... why because, there will always markets exists for different categories of customers from the suppliers perspective in the commercial world...Market evolves.. Market is very dynamic... A niche area today becomes mainstream once the goods/ services are commodotised... Change is the only certainity in the Market...
What the proposed guidelines provide is for Rupay to have a chance to compete against Visa and Master. Remember every supplier have their own merits and demerits.. At the end market matures at an equilibrium point...

Take an example: Basically all the banks provide the same kind of products and services and features are also very similar if not the same...
Then why we have so many banks... Instead we can have only one single Bank, right??
In a market, there will be some differential factors among the market participants... that is how market works...


Anyway, time will tell the which scanario pans out in the future.. but for to Rupay to become a dominant player there is a very very long road to cross...

 

[abhishek0882]

The difference will be the offerings and benefits provided by the network such as no of lounge access, Bookmyshow discounts etc. This will be a major factor in deciding which variant to choose

Which essentially makes them 2 different cards with the same name, right?

 

[Akashgore10]

Which essentially makes them 2 different cards with the same name, right?

Yes

 

[abhishek0882]

To be honest, I didn't understand your confusion... I am very much confused about your confusion...😕😉🙂 , take it easy...
Only two things have changed from these guidelines:
1) A network provider can not restrict the issuer to tie up with them only ( its at the banks discretion to opt two or more networks... Banks may still can choose to be only one network if they want to be..

2) Customer's request to choose their desired network (IF and IF only the card is provided in two or more than two network variants).

Other than the above two everything else remains the same...

okay let me dissect your confusion...
Scanario 1)

Say Bank1 issue Card A on Visa and Rupay...
use case 1..
If VISA Card A is used at an international location, there won't be any issue.. at the same time if Rupay Card A is used at an overseas location , it may not be accepted.. So in this scenario , a customer most likely opt for VISA Card A.
Use Case 2..
If a customer's spends are mainly domestic spends and want to use this for UPI spends then his obvious choice is RUPAY Card A over VISA Card A..
What is currently happening is: When both VISA and RUPAY Card A variants are available, the bank is not honouring the customers request of their choice and forcing them to use a card which is aganist their preference...
These guidelines provide a certainity to assure the customers choice be honoured and Banks can't deny thier request.
Very Very key point here is , this never forces a Bank to isuse the card on more than two networks in the first place...I t is completely upto the Bank whether to issue Card A on one , two or three networks..

Scenario 2:


Here is my confusion about your confusion...
In the above case, both cards are different with different feautures on two different netwroks. so we can't compare between these two cards.
And also Scenario1 and 2 also can't be compared because they are not apple to apple comparision...

And coming to your main confusion( I suppose I got it right this time around)..
You are thinking Rupay will drag down both Visa and Master to their low level of quality because of backing of Govt's big muscle... It will most probably not happen in a democratic and capitalist econemies... why because, there is a market for different categories of customers from the suppliers perspective in the commercial world...Marke evolves.. Market is very dynamic... A niche area today becomes mainstream once the goods/ services are commodotised... Change is the only certainity in the Market...

Time will tell the which scanario pans out in the future.. but for to Rupay to become a dominant player there is a very very long road to cross...

Thank you so much for your patience with me. And for making the effort. I understand it better now, it seems. The ONLY difference it makes now is that the card issuer cannot force or have a discretion of which network variant to offer to the customer, IF there's a choice available in the first place. If banks decide not to offer cards in different variants, as is mostly the case today, nothing changes. UNDERSTOOD. Thanks. My only thing was, is it such a big deal it is being made out to be?

 

[SSV]

Thank you so much for your patience with me. And for making the effort. I understand it better now, it seems. The ONLY difference it makes now is that the card issuer cannot force or have a discretion of which network variant to offer to the customer, IF there's a choice available in the first place. If banks decide not to offer cards in different variants, as is mostly the case today, nothing changes. UNDERSTOOD. Thanks. My only thing was, is it such a big deal it is being made out to be?

I have modified my post again and added some more content at the end.. Please go thru it again... Hope you will have more clarity now.. Sometimes patinece and observations are very helpful in understanding the market...and also which way you are looking at the market (perspective) also gives a better understanding...

RBI New Proposed Guidelines for Card Networks: Empowering Customers and Promoting Choice in Card Networks

Indeed this is a wonderful posts and explains things very clearly. I had understood this though, but this post gives much more clarity to me. However, I am still a little too dumb to understand the point of this. How are the two scenarios different - 1) Bank offers card A on VISA and RUPAY...

www.technofino.in

 

[thanix]

Thank you so much for your patience with me. And for making the effort. I understand it better now, it seems. The ONLY difference it makes now is that the card issuer cannot force or have a discretion of which network variant to offer to the customer, IF there's a choice available in the first place. If banks decide not to offer cards in different variants, as is mostly the case today, nothing changes. UNDERSTOOD. Thanks. My only thing was, is it such a big deal it is being made out to be?

More than direct customer impact, this step is an legal framework to curb the anti competitive practice adopted by the early card companies. Ideally this should have been done by CCI, in my opinion.

 

[SSV]

Thank you so much for your patience with me. And for making the effort. I understand it better now, it seems. The ONLY difference it makes now is that the card issuer cannot force or have a discretion of which network variant to offer to the customer, IF there's a choice available in the first place. If banks decide not to offer cards in different variants, as is mostly the case today, nothing changes. UNDERSTOOD. Thanks. My only thing was, is it such a big deal it is being made out to be?

Yes it is a big deal....
Again the point of view matters here ...
In this case, you have to look at from MACRO point of view to understand the impact of this regulation..
(If you want to understand any finance aspect comprehensively, first thing you should do is 'stop looking from consumer's perspective, start looking from the supplier perspective and economy perspective i.e. at Macro level, then everything starting to fall in right places for you..)
More later..

 

[jack333]

Every year RBI is bringing some diwali bumper and launching on Oct 1 🤣

 

[anivar]

One more too

 

[rockking1994]

I feel I am missing something here, maybe too dumb to understand this. First, I need to understand how this will work, if all cards are offered with all card network variants:

• will it mean that the same card will have different features, offers and terms based on the network that it is issued on? If so, how is it different from the card issuer offering different cards on different networks the way they are doing now? Will it not just create more confusion?
• If it means that, unlike the above point, the same card will have to have largely the same features irrespective of the network they are issued on, it will mean that none of the networks will have any USP, everyone will offer the same as the other network, rather be forced to offer the same. This will kill competition, innovation and creativity, as well as benefits to customers as there will be no incentive for all networks to together offer a more customer friendly offering because customers will have to opt for whatever is being offered by all networks. They can choose a different card by a card issuer, but choice of the network will be redundant.
• I don't know why I feel that it is not about giving choice to the customer, but it is about killing competition for Rupay using the government's/RBI's muscle. Rather than competing on a better offering, they are trying to bring other networks to their level, as the other networks will not be able to offer anything better than Rupay and all networks will become the same. So the other networks can not offer anything better than Rupay even if they wanted to. So Rupay need not compete with them on better offerings. It can give average to no offers and still be in its comfort zone knowing that others also cannot offer any better.

I hope I have been able to articulate my confusion properly. Would love to know and understand from others as I can see overwhelming support in favour of the move. In brief, my confusion is, if an Infinia or Magnus, if offered on VISA and RUPAY, will they have the same features, offers and terms or different. If same, according to me it will be disastrous for customers and if different, then I do not understand how it is different from the situation now because they might as well name the cards with different names like they do now.

Interesting I didn’t think of it like that maybe be i was to clouded by the idea of using all cards trough upi
I think the network companies all though can not specifically enter into contract stopping the banks from issuing other cards they can certainly use other tactics to make cards exclusive
Even i feel like rbi/ncpi is using muscle to win rather being competitive
I think there will be differences between same card thoug not very drastic mostly lounge availablity as we currently already have

 

[R@ndomiz€r]

From what I foresee, this basically enables all banks to bring their super premium cards on Rupay network with same benefits. So seeing an Infinia or Axis Magnus on Rupay network might actually be a reality in some form or shape (Rupay cards with same benefits might be called something similar e.g. Infinia on MC/VISA might become Infinia Reserve on Rupay). NPCI knows it is on borrowed time to establish some market share because sooner than later other networks too will be available on UPI. So it has to go full blast mode to capture the market and establish itself as a premium network like the MC, VISA and AMEX. And, with key event based tieups (IPL, Lolapalooza, Sunburn etc.) it has already started to turn on some heat on the other networks.

 

[panu24]

From what I foresee, this basically enables all banks to bring their super premium cards on Rupay network with same benefits. So seeing an Infinia or Axis Magnus on Rupay network might actually be a reality in some form or shape (Rupay cards with same benefits might be called something similar e.g. Infinia on MC/VISA might become Infinia Reserve on Rupay). NPCI knows it is on borrowed time to establish some market share because sooner than later other networks too will be available on UPI. So it has to go full blast mode to capture the market and establish itself as a premium network like the MC, VISA and AMEX. And, with key event based tieups (IPL, Lolapalooza, Sunburn etc.) it has already started to turn on some heat on the other networks.

What I have understood by this new RBI guideline is that only if bank provides some card in rupay variant and you hold its visa or MC variant then you can get network changed. If any card is not available in Rupay, you cannot force bank to provide that card on Rupay network.

 

[2024]

On review, the RBI has observed that the existing arrangements between card networks and card issuers (banks and non-banks) limit the availability of choices for customers. As a result, the RBI has drafted a set of guidelines and is seeking feedback. It is expected that the implementation of these proposed guidelines will benefit both customers and banks.

The proposed guidelines are as follows:

1. Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.
2. Card issuers shall issue cards across more than one card network.
3. 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 RBI has recommended that banks and card networks implement these guidelines during amendment or renewal processes and in new agreements executed from the date of this circular (5th July, 2023). The directions specified in paragraph 3(b) [2] and (c) [3] will take effect from October 1, 2023.

These guidelines empower customers to select a card network of their choice, provided that the card issuer already offers cards on multiple networks. Previously, there have been cases of banks refusing to change card networks, but after October 1, 2023, banks will be obligated to honor customer requests.

This guideline will also benefit banks as card networks will no longer be able to prevent them from issuing cards on other networks.
Here's an example to illustrate the impact:
Suppose Bank X issues the "Bank X Cosmic Credit Card" on the Visa network. Visa cannot prohibit Bank X from also offering the "Bank X Cosmic Credit Card" on Mastercard or any other network.
In a scenario where Bank X issues the "Bank X Cosmic Credit Card" on Visa, Mastercard, and Rupay networks (multiple card networks), the bank should inquire about the customer's preferred network. If a customer later decides to change their card network, the bank must respect and comply with their decision.
If Bank X issues the "Bank X Cosmic Credit Card" on a single card network, let's assume Visa, then customers cannot request Bank X to issue the "Bank X Cosmic Credit Card" on Mastercard, Rupay, or any other network.

We have voiced our concerns on various social media platforms regarding this issue, and it is reassuring to see that the RBI is paying attention. This is a positive development for all of us.

Please find attached a copy of the draft guidelines.
Link: https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4280

Sir, after 1oct23 can we request hdfc for DCB LTF to infinia Visa LTF

 

[panu24]

Sir, after 1oct23 can we request hdfc for DCB LTF to infinia Visa LTF

This guideline is about getting same card on other available networks not about card change.

 

[Abhishek012]

What I have understood by this new RBI guideline is that only if bank provides some card in rupay variant and you hold its visa or MC variant then you can get network changed. If any card is not available in Rupay, you cannot force bank to provide that card on Rupay network.

Yes. NPCI itself don't want to launch super premium and ultra premium cards because NPCI is non-profit org.

The vision of NPCI is to create an alternate network and help poor to middle class people of India, small banks, all small fintech companies, small technology service provider, NCMC like metro/bus payment system and last create an alternative cross border international payment.

That's not all, NPCI International (NIPL) also help other nation to create their own alternative UPI like payment system and card payment system.

Many people's dnt know, NPCI in talks with many European, African, Asian, North and South American countries to create their own RuPay and UPI like payment system.

Some people don't even know, Many Americans dnt like Visa and Mastercard because of their duopoly, NPCI in talks with many American companies to launch QR code like payment system in USA.

In US, "The Credit Card Competition Act of 2023 proposes opening up payment processing networks to more competitors to potentially lower processing fees and the costs merchants pay. This legislation could save businesses money on interchange fees if new networks begin offering lower fees." - https://www.cnet.com/personal-finance/credit-cards/advice/credit-card-competition-act/

If anyone interested about The Credit Card Competition Act of 2023 proposed by US Senate Durbin, Richard J. to end the monopoly of Visa and Mastercard in USA. Read full details here -

https://www.durbin.senate.gov/imo/media/doc/The%20Credit%20Card%20Competition%20Act%20of%202023%20-%20one-pager.pdf

Last thing, NPCI is not just creating an alternative to Visa and Mastercard. NPCI wants to create an alternative to SWIFT.

NPCI has a completely different approach.

One important thing is that Infinia, Magnus have very few user base. 90% credit card users have premium credit card not super premium or ultra premium cards.

It's just a waste of time and money to launch Infinia, Magnus etc cards on RuPay variant.

@R@ndomiz€r

 

[R@ndomiz€r]

What I have understood by this new RBI guideline is that only if bank provides some card in rupay variant and you hold its visa or MC variant then you can get network changed. If any card is not available in Rupay, you cannot force bank to provide that card on Rupay network.

You don't have to force a bank but what's stopping them from launching a variant on Rupay network as well? Or a competing variant with similar benefits.

Because Rupay won't scale as a network unless it projects a certain kind of perception in the minds of the consumers which makes them go for it over MC and Visa.

@Abhishek012 totally Rupay wants to take on Swift and flip the overall money transfer paradigm. They've already made some crazy tie-ups in Europe, SEA and even NA. But domestically the challenges are slightly different because Indian consumers still don't prefer taking a card on Rupay variant even for an entry-level card. Partly because of banks pushing MC or VISA variants over Rupay as it is perceived as an inferior network over both of them. From personal experience speaking with both HDFC and SBI staff both of them told me "Sir, Rupay kyu le rahe ho? Mastercard lo zyada premium hai aap ko benefits zyada milenge. Rupay se behtar hai." For Rupay to dominate the market or even to capture substantial market share and create a dent to the duopoly they need to create a perception where Rupay seems premium and is available for users in super premium category. Else even if the govt banks start pushing Rupay the customer is not convinced and feels premium while using their cards everything will come to the nought.

 

[Abhishek012]

You don't have to force a bank but what's stopping them from launching a variant on Rupay network as well? Or a competing variant with similar benefits.

Because Rupay won't scale as a network unless it projects a certain kind of perception in the minds of the consumers which makes them go for it over MC and Visa.

@Abhishek012 totally Rupay wants to take on Swift and flip the overall money transfer paradigm. They've already made some crazy tie-ups in Europe, SEA and even NA. But domestically the challenges are slightly different because Indian consumers still don't prefer taking a card on Rupay variant even for an entry-level card. Partly because of banks pushing MC or VISA variants over Rupay as it is perceived as an inferior network over both of them. From personal experience speaking with both HDFC and SBI staff both of them told me "Sir, Rupay kyu le rahe ho? Mastercard lo zyada premium hai aap ko benefits zyada milenge. Rupay se behtar hai." For Rupay to dominate the market or even to capture substantial market share and create a dent to the duopoly they need to create a perception where Rupay seems premium and is available for users in super premium category. Else even if the govt banks start pushing Rupay the customer is not convinced and feels premium while using their cards everything will come to the nought.

100% agree with you but NPCI is currently non-profit company.

First NPCI needs to hive off RuPay and turn into for-profit company. This is possible only when RuPay integrate all latest features like Autopay, EMI (Amazon still not supported RuPay EMI), Merchant name and transaction amout add on RuPay otp page (20%-30% banks are still not added this feature), NFC on-device payment etc.

Once all latest features will live and then RuPay will be ready to turn into for-profit company.

 

[Abhishek012]

How many of you think these guidelines will be implemented tomorrow ?

 

[SSV]

How many of you think these guidelines will be implemented tomorrow ?

Ne ga tive...