Market share of RuPay cards is set to improve within months of banks implementing the latest Reserve Bank of India (RBI) directive of giving customers an option to choose card networks, said people from the banking industry.
The banking regulator has asked banks to give customers a choice of three card networks: Visa, Mastercard, or RuPay. Card issuers are directed not to enter into explicit and restrictive agreements with card network providers, directly or indirectly.
“We believe the recent RBI circular to allow a choice to customers will further accelerate RuPay Card’s acceptance among customers and even card issuers, at least in India,” said a research report by Emkay Global.
The RBI has asked card issuers to “offer choice to customers to select their network provider, instead of pushing cards with a network partner based on their own preference and incentives,” the report added.
RBI issued a formal directive after it failed in its attempt to nudge card issuers to give customers a choice. The move, effective October 2024, aims to promote a domestic card and protect customers.
“It is observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers,” the RBI said.
These measures will impact the earnings of card issuing companies, since RuPay offers lower fees to card issuers as compared to its rival Visa or Mastercard, bankers said.
Second, international acceptance of RuPay is still restricted to a select few countries like Bhutan, Nepal, Mauritius, Singapore, and UAE. Although it has tie-ups with global card networks like Discover, Diners, JCB, and UniPay- these card networks have lower merchant coverage than Visa or Mastercard.
Those card issuers with less than 10 lakh active card holders and those with their authorized networks (e.g., Amex) are exempted from giving customers a choice of card network company. Effectively, the largest players – such as SBI Cards, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank – having over Rs 10 lakh customer base will have to give new customers a choice on card networks.
