INDIA’S central bank told the nation’s lenders to stop entering into exclusive agreements with credit card networks, in a surprise move that may deal a blow to the world’s largest payments firms including Visa and Mastercard.
Banks and non-bank lenders must stop “any arrangement or agreement with card networks that restrain them from availing the services of other card networks,” the Reserve Bank of India said on its website on Wednesday (Mar 6). Lenders and card networks such as Visa and Mastercard currently require customers to agree to terms that aren’t “conducive to the availability of choice for customers,” it said.
Banks will now need to provide an option to their customers to choose from multiple card networks at the time of issue, while existing cardholders may select their networks at the time of the next renewal.
The move may impact Visa and Mastercard the most in India as they charge various fees based on their card offerings, including for use overseas. Cards from Rupay, part of India’s homegrown National Payments Corporation, don’t succumb to network registration fees and are typically free for domestic usage.
The new directive will not apply to credit card issuers with fewer than 1 million active cards and won’t impact issuers using their own authorised network for such cards, the RBI said. This may largely shield card networks such as American Express as it uses its own network. BLOOMBERG
