India’s ban on MasterCard could affect banks’ card operations

India’s decision to ban MasterCard for non-compliance with data storage regulations has destabilized the country’s financial sector. This will distort the bank’s card offerings and affect revenue, payments and banking industry executives. The central bank’s order in April took similar action against American Express. But MasterCard is a major player in the Indian market, where many lenders offer cards using the US firm’s payment network.

A Reuters analysis of the online card listings of 11 domestic and foreign banks in India revealed that about one-third of the approximately 100 debit cards offered by MasterCard. At the same time, more than 75 credit card variants used its network.

The Reserve Bank of India (RBI) has said that the issuance of such cards will be stopped from July 22 as MasterCard has not complied with the 2018 rules. In which the foreign card network is required to store Indian payment data locally for “impractical supervisory access”.

While existing customers will not be affected, business effects will be significant. Banks will then be required to sign new business deals with competing networks such as Visa. This is a process that can take months and weeks of back-end technology integration, five payments and banking officials said.

A banking official said it could take up to five months to change the visa. By banning American Express and MasterCard, Visa will have an unprecedented advantage in negotiating the already dominant credit card market. One of the sources, a senior Indian banker, said, “This will mean temporary disruption for banks, very tense negotiations and short-term business losses.”

The Reserve Bank’s 2018 rules were adopted by US firms despite aggressive lobbying in an effort to make them easier. MasterCard said it was “disappointed” by the decision and would work to address those concerns. “This is in line with our significant and sustained investment in our customers and partners to further the Government’s Digital India Vision,” MasterCard said in a statement on Thursday.

The decision is a major blow to MasterCard, which sees India as a major market. After investing 1 1 billion (approximately Rs 7,450 crore) from 2014 to 2019, in 2019, MasterCard said it is in a hurry to invest 1 1 billion (approximately Rs 7,450 crore) in India over the next five years.

MasterCard also has research and technology centers in India, where it employs 4,000 people, the second largest after the United States, up from just 29 in 2013. With the proliferation of digital payments, Indians’ use of credit and debit cards has increased. As of May, India had more than 62 million credit cards and 902 million debit cards, according to RBI data. Through which .4 40.4 billion (approximately Rs. 3,01,120 crore) were transacted.

Sources said delays in visa transfers also affect bank expenses and other income from their card business. Some banks, such as RBL of India, list 42 credit cards on their website. All of them use the MasterCard network, while Yes Bank lists 7 cards using MasterCard. The Citibank website offers four MasterCard credit cards.

The RBL said in a statement on Thursday that it had entered into an agreement with Visa for its credit cards following the RBI’s order, but the consolidation would take 10 weeks. RBL said it has a 5 percent share of the credit card market. But issuing 100,000 new cards each month could potentially have an impact. Its stock fell more than 3 percent in early trading. RBL, Yes Bank, and Citibank did not immediately respond to a request for comment.


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