RBI's decisions on foreign cards a boon for India's RuPay

The credit cards industry is witnessing a sudden churn, due to RBI's ban on some foreign players.

 RBI's decisions on foreign cards a boon for India's RuPay

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• The story: India's central bank, the Reserve Bank of India, has been firm on its need for data localisation by financial firms. The embargo on Mastercard from taking new domestic customers on its card network was a part of that strategy. That may now be a golden opportunity for domestic card player RuPay, which has lagged in credit card issuances.
• RBI's new policy: On 5 April, 2018, the RBI released a statement on ‘Developmental and Regulatory Policies’ and ‘Storage of Payment Systems Data’ without any prior consultation with stakeholders. The objectives were: ensuring safety and security of payment systems data by adoption of best global standards, continuous monitoring and surveillance to reduce risk from data breaches, and unfettered access to all payment data for supervisory purposes. The next day, 6 April, 2018, a notification on "Storage of Payments System Data" arrived.

1. It said, “All system providers shall ensure that the entire data relating to payment systems operated by them be stored in a system only in India. This data should include the full end to end transaction details / information collected / carried / processed as part of the message / payment instruction. For the foreign leg of the transaction, if any, data can also be stored in the foreign country, if required.”
2. The target comprised only a handful of payment processors. What triggered the RBI was not known; whether it was breaching the Financial Action Task Force (FATF) norms, or internal security or core mandatory stipulations.
3. In 2013, following a decision made in a meeting of the Financial Stability and Development Council, the Ministry of Finance instructed that all subordinate legislation should be published before they come into effect. The RBI did it without any of this!

• Conflict of interest: The RBI has itself floated the National Payments Corporation of India (NPCI), that performs the same functions as Mastercard, American Express and Diners, now stymied by it.
• RuPay story: It is a product of the National Payments Corporation of India (NPCI), launched in 2012 as the country’s domestic card payment network. It is a market leader in terms of overall card issuances but lags behind in credit cards and spends. By November 30, 2020 there were 60.36 crore RuPay cards issued and it had a total market share of over 60 per cent of the total cards issued. Most were debit cards with only 9.7 lakh credit cards issued as on November 30, 2020. Visa has the second largest issuance of cards followed by Mastercard.
• Ban a boon: With most banks bullish on credit card acquisitions, the ban on Mastercard means they have to urgently look at other tie ups and partnerships.

1. RuPay and Visa are the only two payment companies without any restrictions on taking new customers
2. Capturing not only issuance but also spends is a key focus for most payment players and lenders
3. This could prove to be an opportunity for RuPay to expand its market share in credit card issuances
4. The embargo on Mastercard has left a huge hole in the market, especially in the mid-income consumer segment

• Sudden break: Mastercard was the fastest growing credit card offering in India, and a golden opportunity for both Visa and RuPay has sprung up. Visa’s offering may be more sophisticated in terms of marketing. RuPay has come up with great infrastructure. The issue of zero MDR could prove to be slightly challenging for RuPay.

1. There are 1,158 issuer banks for RuPay cards. The NPCI has been working on tie ups to ensure that it has a global acceptance, needed to lure high spending customers.
2. Credit card issuances increased by 9.1 per cent year on year to 6.23 crore by May 2021 with outstanding spends per card registering a 3.1 per cent growth to Rs.16,700.

• Summary: With most realising the need to have atleast two partnerships in place for card issuances, RuPay could gain quite a bit as it is unclear when the embargo on the other players will be lifted.

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