India’s ban on Mastercard may affect card operations of banks


India’s decision to ban Mastercard for non-compliance with data storage regulations has destabilized the country’s financial sector. This will disrupt card offerings of banks and affect revenue, payments and banking industry executives. The central bank’s order followed a similar action against American Express in April. But Mastercard is a big player in the Indian market, where many lenders offer cards using the US firm’s payment network.

A Reuters analysis of online card listings of 11 domestic and foreign banks in India showed that MasterCard accounted for nearly a third of the nearly 100 debit cards on offer. At the same time, more than 75 credit card variants used its network.

The Reserve Bank of India (RBI) said that the issuance of such cards will stop from July 22 as Mastercard has not complied with the 2018 norms. In which foreign card networks are required to store Indian payment data locally for “unfiltered supervisory access”.

Although existing customers will not be affected, the business impact will be significant. Banks will then be required to sign new commercial deals with rival networks such as Visa. It is a process that can take months and weeks of back-end technology integration, five payments and banking executives said.

A banking official said that it may take up to five months to switch to Visa. And with American Express and Mastercard banned, Visa will have an unprecedented advantage in negotiations in an already dominated credit card market. One of the sources, a senior Indian banker, said, “This will mean temporary disruptions for banks, very busy negotiations and loss of business in the short term.”

RBI’s 2018 rules were adopted despite aggressive lobbying by US firms seeking to ease them. Mastercard has said it is “disappointed” by the decision and will work to address these concerns. “This is in line with our significant and continued investment in our customers and partners in India to advance the government’s Digital India vision,” Mastercard said in a statement on Thursday.

The decision comes as a major setback for Mastercard, which counts India as a major market. After investing $1 billion (about Rs 7,450 crore) from 2014 to 2019, in 2019, Mastercard said it was “hurry in India” to invest $1 billion (about Rs 7,450 crore) over the next five years. declare.

Mastercard also has research and technology centers in India, where its workforce of 4,000 people is the second largest after the United States, up from only 29 in 2013. With the proliferation of digital payments, Indians’ use of credit and debit cards has increased. RBI data shows that India had over 62 million credit cards and about 902 million debit cards as of May. By whom together, transactions of $ 40.4 billion (about Rs 3,01,120 crore) were done.

Sources said the delay in transitioning to Visa also impacts bank charges and other income from their card business. Some banks, such as RBL of India, list 42 credit cards on their website. All of these use the MasterCard network, while Yes Bank lists 7 cards using MasterCard. The Citibank website offers four Mastercard credit cards.

RBL said in a statement on Thursday that it had entered into an agreement with Visa for its credit cards following the RBI order, but the integration would take up to 10 weeks. RBL said it has a 5 per cent share in the credit card market. But the issuance of 100,000 new cards every month could potentially be affected. Its stock fell more than 3 per cent in early trade. RBL, Yes Bank, and Citibank did not immediately respond for comment.

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