We are all very well aware of multiple card networks while using credit/debit/prepaid cards. Popular card networks in India are Visa, Mastercard, RuPay, American Express, etc. All of the card networks except RuPay are US owned. Recently, the Reserve Bank of India issued a draft advisory that card issuers (banks) must provide customers with an option to choose between multiple card networks.
At present, card issuers (banks) generally issue Debit/Prepaid/Credit cards with their preferred card network. Commonly this happens due to some agreements between banks and card network companies. So, it is up to the card issuer to decide which card network to use in its card.
Why Card Network Necessary.
Basically, card networks play a mediator role between the customer bank and merchant bank for instant payment approval. The services of Mastercard, Visa and RuPay are indeed important to us. Moreover, the card networks offer a centralized system over multiple banks for instant money transfers.
In 2020, Visa and Mastercard generated over $21 and $15 billion in revenue, respectively. The revenue percentage is going up year on year as the usage of credit, debit, and prepaid cards increases.
UPI and RuPay
Specifically in India, UPI is emerging more successfully while eating major junk of revenue going into the hands of foreign companies like Visa and Mastercard. Furthermore, India has RuPay, an indigenous card network by NPCI, an alternative to overseas card networks.
RBI issued Draft Circular for Debit/Credit Cards
Reserve Bank of India issued a draft circular regarding “Arrangements with Card Networks for issue of Debit, Credit and Prepaid Cards.”
a) Card issuers (banks) shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.
b) Card issuers shall issue cards across more than one card network.
c) 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.