RBI's New Card Network Rule Spells Opportunity For RuPay

The homegrown RuPay card network may just get a boost, as credit card portability is now a reality, as per bankers in the know. According the Reserve Bank of India, starting Sept. 6, Indian credit card holders can freely decide the card network they want to use.

In a circular issued on Wednesday, the Indian banking regulator said that for new users, the bank will offer options and the existing cardholders can make the choice at the time of renewal. The rule, though, is only applicable to lenders who have more than 10 lakh active credit cards.

"If you push RuPay, the earnings out of processing transactions would remain in the country," said Vijay Jasuja, former managing director and chief executive officer of SBI Card and Payment Services Pvt. "Initially, there was an acceptance problem for RuPay internationally," he said, but that seems to be changing.

The RuPay credit card can be used for international transactions at any PoS, ATM and e-commerce website which are enabled on payments networks across the world, such as Discover Financial Services, UnionPay, Pulse, JCB, Diners Club International.

While Visa has more merchant locations, payments networks like Discover Financial Services, JCB, and Diners Club International are acceptable in most countries.

"RuPay does not have its own infrastructure globally. So, wherever the partner cards are accepted, RuPay cards can be used for seamless transactions," Ankush Dixit, founder and CEO of Multiply told NDTV Profit.

An added benefit for RuPay cardholders is that they can make payments through Unified Payments Interface, Dixit said. This is an overlay for global acceptance, as Indians can now use UPI to make payments in seven countries, namely Sri Lanka, Mauritius, France, UAE, Singapore, Bhutan, and Nepal.

"NPCI and RBI is trying to cash in on huge volumes of UPI transactions in comparison to credit card and debit cards (payments)," Dixit said. "I think they have deliberately not enabled Visa and Mastercard on UPI and it won't happen for some time because they want to give a lead to RuPay," he said.

However, it is not going to be an easy sail for RuPay either. To attract Visa and Mastercard holders, RuPay will need to enter into partnerships with high-end brands and services to offer competitive benefits, Dixit said.

As banks prepare for the change, it is the customer that feels the win, according to Adhil Shetty, CEO of Bank Bazaar.

RuPay would get "incrementality," with consumers now able to switch networks, including to RuPay where they have UPI interoperability, Shetty said.

"It's an incremental win-win for merchants, card issuers and customers. There are about 50 million merchants who only have a QR code and no PoS; they can now start taking RuPay cards," he said.

There's a catch, though.

A shift from one card network to another would depend on the suite of benefits they offer, Dixit said.

While the RBI has allowed choice for consumers, it does not necessarily mean that a customer can avail same premium benefits on Visa or Mastercard if one shifts to RuPay cards. For Bank of Baroda, for example, launching Visa or Mastercard for low-value spenders would be expensive, he said.

For major banks, arrangements with multiple card networks such as Visa, Mastercard, and RuPay are already in place. HDFC Bank Ltd., SBI Card, ICICI Bank Ltd. and Axis Bank Ltd. hold 70% of the credit cards market share, according to RBI's monthly data releases.

These multiple tie-ups, though, do not cover all card variants.

For instance, Axis Bank has only one co-branded credit card on RuPay, in partnership with Indian Oil Corp. HDFC Bank has four co-branded cards and two general credit cards on RuPay. Bank of Baroda's credit card offering is skewed towards RuPay network.

RBL Bank, too, has arrangements with Visa and Mastercard. But, the private lender is planning to launch RuPay credit cards in next two months, according to the first person quoted above. This would, however, be challenging due to high operational cost and complex implementation challenges, the people said.

Facilitating what is required as per the RBI's circular would involve tweaks in technology infrastructure and communication to customers, the first person said.

In light of this, lenders are now seeking clarifications from the regulator on whether all card variants have to be facilitated on multiple networks, they said. Details are also being sought on existing co-branded partnerships, which are exclusive with certain card networks.

Since the RBI guidelines are expected to provide an impetus to RuPay network, one may see foreign banks venturing into RuPay credit cards, according to Jasuja. Those who are in credit card business in India may be asked to add RuPay cards to their arrangements, he said. "Underlying benefit to RuPay is more than what meets the eye."

As per the RBI data, Standard Chartered Bank is the only foreign lender that lies in the purview of the RBI's circular, as of January.