The implementation of card network portability is likely to be delayed as issuers await final guidelines from the RBI. Even so, issuers say they are ready to meet the October 1 deadline for providing customers with their network of choice, albeit with certain restrictions.
Issuers are already giving cards across more than one network, and customers can opt for a network of their preference. However, it is the requirement of network portability or offering two networks for every card that seems to be a challenge, as it will lead to duplication of cards, increased costs for issuers, and impact commercial tie-ups with networks and co-branded partners, sources told businessline.
“The norm requirement has already been fulfilled. If a customer says they want a RuPay card, I can give it to them. But I have three different cards with different features on various networks. If the customer doesn’t have a preference, I will sell what benefits me, but it’s not right to say that the customer does not get the choice,” said the consumer banking head at a private sector bank.
As a part of the draft norms issued in July 2023, RBI asked card issuers not to enter into agreements with card networks that restrain them from availing of the services of other card networks. They were also asked to issue cards across more than one network and allow customers the choice of network at the time of card issue or anytime thereafter, effective October 1.
businessline had earlier reported that issuers have been in discussions with the central bank to allow them to issue cards across multiple networks within each income or product segment, which they already do, rather than for each individual card.
In August, HDFC Bank’s Parag Rao said that while duplication does not make economic sense, banks can adopt a dual carding strategy where the issuer sets a limit across multiple cards and customers have two different cards on two different networks. While most in the industry echo this sentiment, they also agree that this will lead to increased costs for issuers.
“Like we issue add-on cards to family members, we can issue another card on the second network, and customers can decide which they want to use when and where. The limit does not change, but my earnings change because in Visa, my intercharge income would be much higher,” a senior executive said.
Industry players have also submitted that customers are usually network agnostic and choose cards based on rewards and cashbacks, which are usually offered by the issuers based on commercial considerations such as charges and fees, and not by network providers.
“The problem is how revenue and expenses will be shared. While this is a commercial decision of people involved in the ecosystem, with no coded mechanism, it could lead to disparities,” said the head of payments at a private sector bank.
It makes sense for issuers to enter into partnerships and offer discounts and rewards based on volumes. “But if it becomes the responsibility of the network provider, how are they going to make money on it?” he said, adding that it will also dilute and alter the role of network providers because their role is to offer the best technology platform and not be involved with credit and discounts.