Synopsis: All the banks in India depend solely upon cards network giant MasterCard for their businesses. Hence it will take at least 2 months to shift their business to any other company.
Earlier this week the Reserve Bank of India took a crucial decision to ban the global cards network giant MasterCard from issuing new cards in the country.
MasterCard has been prohibited from getting new customers on board from July 22 for violating the rules and regulations of data localization, said the RBI officials on Wednesday. As most of the banks solely depend upon MasterCard in India the transition to shift their businesses to other companies will take at least 2 months. The other prospective contenders include RuPay and Visa.
Since 2018 it was made compulsory for all payments data from India to be stored within the country itself. This move was opposed initially but with time all complied.
Companies such as MasterCard or Visa are considered the top service providers as they undertake millions of transactions. Opinions differ on the move as many consider that a penalty or fine would have been an accurate course of action over an outright ban.
\This sudden move would create a lot of problems not only for banks but also for the general public. There also was another option with the RBI to warn other stakeholders before taking the action. This move however sends a strong message that all players should adhere to the data localization rules.
This decision from RBI came as a blessing for Visa and RuPay. Visa will probably be the best gainer after this news as banks have very little choice.
This decision will have affecting three credit card issuers gravely. These are RBL Bank, Yes Bank, and Bajaj Finserve since their entire credit card system is dependent upon MasterCard.
RBL bank expects that their credit card issuance will be through Visa after the technology integration said by the bank officials.
The Nomura report said HDFC Bank has 60% of its card schemes tied to MasterCard, American Express, and Diners Club, while for Axis Bank and ICICI Bank it is 35-36%. However, HDFC Bank is already under RBI’s curbs on credit card issuances from December and, thus, may not be incrementally hurt by the ban.
Experts also stated that the ban on MasterCard could also impact liability account acquisition as debit card issuances will be hit.
