From September 6, 2024, all credit cardholders in India will be at liberty to select a card network of their preference, be it Visa, MasterCard or RuPay, when initiating a request for a new credit card or renewing the old credit card. This, as explained by the Reserve Bank of India (RBI), seeks to enhance user satisfaction as well as generate healthy competition among the different card networks hence allowing the users to reap the maximum benefits in terms of better rewards and cheaper fees.

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What The New Rules Entail?

Before, at the time of applying for a new debit card or a new credit card, the applicants had to accept the assigned card network. Previously card issuance companies had contracts with all the major networks like Visa, MasterCard, and RuPay among others and would only issue cards upholding their internal structure. Now, with the new RBI guidelines, the network selection does not remain vested with the bank but with the customer.

As stated in the RBI circular, “Card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks. This option may be exercised by customers either at the time of issue or at any subsequent time.” This action allows not only new applicants but also card renewal customers to choose the network they would like to have.

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Exemptions

It has to be added that none of the card networks mentioned above applies to every card issuer. For example, if a credit card issuer has 10 lakh or fewer active cards, this rule does not apply to them. In addition to that, issuers advertising their own paid card networks like American Express do not obey such restrictions.

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The Role Of The RBI And The New Guidelines

The RBI has introduced this change to democratise the credit card market, drive competition among networks, and provide consumers with more control over their financial products. The guidelines aim to create a competitive environment where card networks must differentiate themselves by offering exclusive benefits, lower fees, and improved customer service.

By empowering customers to choose their preferred network, the RBI hopes that networks will compete to provide the best rewards and benefits. Card issuers will no longer be able to force customers into using a specific network based on their agreements, and card networks will need to innovate to attract customers.

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Banks Implementing The Guidelines

Many banks have already started implementing these new guidelines. It has been observed that banks such as Bank of Baroda and YES Bank have started permitting customers to select Visa, MasterCard, or RuPay to be used on the application of new credit cards or the renewal of the existing ones.

Not only does this enhancement provide customers with fewer restrictions but it also forces networks to make efforts to enhance their services, as, over time, the majority of people become more choosy about the services provided by their opted for the network.

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Benefits for Cardholders

These networks would also bring a lot of benefits to the cardholders, in this case, the customers. Here are some advantages:

• Wider Acceptance: Different countries or geo-locations have different patterns of card network acceptance – some are more favourable than others. Let’s take for instance Visa and MasterCard as they have higher acceptability in more countries, while RuPay is more useful for domestic transactions and its related uses.

• Exclusive Offers: All card networks come with some offers which are worth taking up. At your selected network, you can enjoy offers like cashback, airport lounge usage and discounts on meals and travelling amongst others.

• Lower Fees: Transaction charges or maintenance fees based on the particular card network which are also available to the cardholders. Because the networks will be working overtime in a bid to reward customers with the best deals, customers will most likely be faced with lower costs.

• Better Rewards: Even the needs of the customers regarding reward programs made available will be sought by networks through some attractive programs. As the competition becomes stiffer, rewards per every transaction may offer more points, more cash back and travel and lifestyle benefits.

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Why Does This Matters?

RBI’s move is also an attempt towards developing a competitive and consumer-centric digital payments ecosystem in India. In giving this leeway, the regulator ensures that the decisions made by the consumers are those that fit their needs and preferences.

For instance, a global traveller who needs a card to be accepted in most countries may prefer the Visa or the MasterCard compared to a person who uses the card for local shopping who would use RuPay for lower fees and local advantages.

This, in turn, is predicted to make the digital payments scenario less boring. Card networks will now have to put more effort into branding and marketing themselves on the strength of exotic offers, better coverage and increased nicety of service.

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Increased Competition Among Networks

There being more options available to cardholders, networks like Visa, MasterCard and RuPay will face more competition among each other. Such competition will benefit the customers in the following ways:

• More Offers: Networks may begin to put more special offers and give more discounts to appeal to customers. For instance, MasterCard may come up with travel promotions while RuPay may come up with ‘shop local’ or other such incentives.

• Better Customer Experience: To keep its customers within the network, card networks may seek to improve the overall experience of the customer through hassle-free transactions, faster systems or support, and better apps.

• More Products: Networks may also come out with additional products like better-enabled contactless payment systems, digital wallets, and enhanced protection that will draw in many people.

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Conclusion

Having the power to choose a credit card network is a differentiating factor in the Indian credit card sector. This new power, which has been facilitated by the guidelines from the RBI, allows customers to choose between Visa, MasterCard, and RuPay among others, according to their preferences. If you plan to use your card outside of India extensively then the worldwide issuer having the rewards on the base level may be more advantageous for you. On the other hand, if the focus is on localised issuer benefits, it is beneficial to use a network that has the least focus on being a cross-border issuer.

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Important Links

Official Website: https://www.rbi.org.in/

Press Release: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx

Contact Information: https://www.rbi.org.in/Scripts/helpdesk.aspx

Register Complaints: https://www.rbi.org.in/Scripts/Complaints.aspx