RBI directive tells debit, credit and prepaid card issuers to give customers more freedom to choose networks
New Delhi, NFAPost: The Reserve Bank of India (RBI) has issued a draft circular addressing the arrangements between card networks and card issuers when it comes to the issuance of debit, credit, and prepaid cards. The circular aims to enhance customer choice and ensure a competitive market for card networks.
As things stand, card networks collaborate with banks and non-banking institutions for the issuance of debit, credit, and prepaid cards. When a card is issued to a customer, the choice of the affiliated network is determined by the card issuer. This selection is based on the previous arrangements established between the card issuer and the card networks through bilateral agreements.
After a review of this system, the RBI has acknowledged that the existing arrangements between card networks and card issuers do not facilitate enough options for customers. Therefore, the RBI has exercised its powers under the Payment and Settlement Systems Act, 2007, to introduce the following measures for card issuers to adhere to:
Restriction-free arrangements
Card issuers are prohibited from entering into any agreements that restrain them from availing the services of other card networks.
Multiple card networks
Card issuers must issue cards across more than one card network, providing customers with a wider range of options so that they can choose a network that best suits them.
Customer Choice
Card issuers must offer eligible customers the freedom to select any one card network from multiple options. This choice can be made at the time of card issuance or at a later stage, depending on the customer needs.
Both card issuers and card networks are expected to comply with the new requirements set forth by the RBI which will be effective from October 1, 2023. This allows the concerned parties a transition period to align their operations with the new regulations that aim to create a more competitive and customer-centric environment.
