The implementation of card network portability may face delays as issuers await final guidelines from the RBI (Reserve Bank of India). Despite this, issuers assert their readiness to meet the October 1 deadline for providing customers with their network of choice, albeit with certain limitations.
Card issuers are already offering cards across multiple networks, allowing customers to select their preferred network. However, the challenge lies in the requirement of network portability, which mandates issuers to provide two networks for every card. This could lead to card duplication, increased operational costs, and potential impacts on commercial agreements with network and co-branded partners.
What changes?
As per the draft norms issued in July 2023, the RBI instructed card issuers not to enter into agreements that restrict them from using services of other card networks. They were also directed to issue cards across more than one network and enable customers to choose their network at the card issuance stage or subsequently, starting from October 1.
Some issuers have proposed a dual carding strategy, where customers receive two different cards on two different networks with a shared credit limit. While this approach aligns with the regulatory requirements, it may result in higher operational costs for issuers.
The challenges
While it may make sense for issuers to form partnerships and offer incentives based on transaction volumes, the responsibility for such arrangements and their economic viability remains a topic of discussion within the industry. The evolving landscape also raises questions about the role of network providers, who traditionally focus on providing technology platforms rather than directly participating in credit and discount-related activities.
Industry players have argued that customers often make card choices based on rewards and cashback offers, which are typically determined by issuers considering factors like charges and fees, rather than network providers. The challenge in implementing network portability lies in addressing revenue sharing and expense allocation, which lacks a standardized mechanism and could lead to disparities within the ecosystem.
