Card issuers having exclusive tie-ups in a fix after RBI curb on Mastercard

Reserve Bank of India’s restrictions on Mastercard from onboarding new domestic debit, credit, or prepaid customers with effect from July 22 will hit a host of credit and debit card issuers. Among those who will now need to look for alternatives are RBL Bank and Yes Bank, apart from the leading private entities including Indigo, Maruti, Flipkart, Tata, Vistara, and BookMyShow among others which issue co-branded cards.

RBL Bank has informed the stock exchanges that around 1 lakh new credit card issuances could be hit. The bank is in talks with Visa, but issuing new cards will take at least 8-10 weeks.

RBL Bank, the fifth-largest issuer of credit cards with a 5% market share, has 30 lakh customers. A large chunk of its cards is also issued by Bajaj Finserv through a partnership agreement.

On the other hand, for new credit cards, the Yes Bank is evaluating a migration to other platforms for a seamless transition, according to a report in The Times of India. The bank’s debit cards are also available on platforms like Visa and indigenous RuPay and the new issuances would not be hit by the apex bank regulator’s restrictions.

The banks face multiple challenges to start a new partnership with Visa. While technical integration is a cost-intensive process, the deal with Visa for incentives and offers will need hectic negotiations.

Good for competition

According to research by ICICI Securities, the restrictions will help improve the market share for the unaffected incumbents. “The issuance of co-branded cards with Mastercard will also stop due to the RBI restriction,” the report said.

Visa will be the primary gainer as banks have been reluctant to issue many RuPay credit cards, experts in the banking sector observe. The domestic issuer is, however, the market leader in debit cards in terms of numbers, but is yet to push spending.

Mastercard vs Visa

Visa and Mastercard are not just credit card transaction platforms but large payment networks as they also support debit cards. They act as liaisons between financial institutions and merchants.

That’s why the card from the banks have a Visa or Mastercard logo. The bank is lending the money to the customer, in the case of credit cards, but Visa or Mastercard is transmitting the necessary information for the payment.

Visa and Mastercard are the largest payment networks in the world.

Both Mastercard and Visa started this new feature of contactless transactions through Wi-fi, allowing the user to tap his or her card on the payment terminal. Both Visa and Mastercard support contactless credit cards.

Another common feature both have is fraud protection. In case of an unauthorized purchase, neither Visa or Mastercard will make the user pay for it if he or she alerts the card issuer immediately. For shopping online, there are also additional layers of security, such as Visa Secure or Mastercard SecureCode.