RBI lifts MasterCard ban, will it impact RuPay?
In a significant move, the Reserve Bank of India officially lifted the 11-month old ban on issuance of new cards by MasterCard. Over the last 11 months, MasterCard had been barred from issuing fresh cards in India. Banks with MasterCard franchises could continue to service their existing customer accounts but could not onboard fresh accounts. This had led to a lot of the banks shifting either to the Visa network or to the RuPay network. With the ban removed, even banks with MasterCard franchise cards will be allowed to onboard clients.
First a quick background to the ban. In April 2018, the RBI had passed a circular stipulating that all card franchises must necessarily house India related data in their India located servers only. While Visa adhered to the deadline stipulated by the RBI, MasterCard, American Express and Diners did not adhere to the circular. As a result, in an order dated July 14th, 2021, RBI banned MasterCard from onboarding new domestic customers. This ban has been lifted after a gap of nearly 1 year.
In fact, the RBI had given considerable time to MasterCard to adhere to the new regulatory norms on payment system data. However, when it was found that they were still non-compliant, it was only then in July 2021 that RBI officially imposed the ban. Over the last one year, the RBI confirmed that MasterCard had made considerable efforts to comply with the regulations on data storage. Consequently, the RBI had decided to do away with the ban. Going ahead, MasterCard franchises will be free to onboard fresh customers.
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A quick word on the RBI storage norms. The RBI April 2018 circular on storage of payment system data clearly stipulates and requires that all system providers must ensure that the entire data relating to payment systems operated by them be stored in a system only in India. This included the customer data, the end-to-end transaction data; apart from the information collected, carried or processed in the payment instruction. This was for pure domestic transactions. For the foreign leg of a particular card transaction, RBI had permitted the mirroring of the data in the foreign country.
Will the move impact RuPay in a significant way?
The answer is yes and no. For starters, RuPay is the largest franchise in India with over 600 million cards and a 60% share in India. However, these are predominantly debit cards linked to no-frills accounts. However, the big difference could come from the permission to link credit cards with UPI. To begin with, the RBI is only allowing RuPay to hook up to UPI and that could give them an edge over the other franchises. We have to wait and see how well RuPay is able to upgrade to tap customers with higher purchasing power.
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