Data becomes crucial asset in digital economy

The RBI recently imposed restrictions on Mastercard from onboarding new domestic customers (debit, credit or prepaid) into its card network from July 22, 2021. Welcoming these regulations on credit cards, Bharat Panchal, Chief Risk Officer –India, Middle East & Africa, FIS Global in an interview with Bizz Buzz said:"The growth of debit and credit card segment is phenomenal in the last five years. Hence, penetration of cards has gone to all-time high in the ecosystem. So, considering the current prohibition on Mastercard would help their competitors till the time Mastercard comes up with the next plan of action."

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How many credit cards are there in the country and how many credit card holders?

As per the latest RBI data for the month ending May, there are a total of 6,23,93,434 credit cards issued outstanding.

What was the idea behind RBI's action against Master Card, Diners' Club, AmEx and HDFC?

Data has become a crucial asset in the digital economy. During the pandemic time, India has seen a huge spurt in digital banking and thus we have become one of the most data-rich countries. Considering future data growth, the April 2018 regulation from RBI was very clear that all payments providers need to align with the data sovereignty laws of India, as they engage in business. The country's laws prevail over everything and every company must follow them. There are many countries around the world seeking the same.

What will be the impact of RBI's action on the credit card industry?

There will be no impact on the existing cardholders from these cards' schemes. They will continue to use their card as usual. However, Mastercard is not allowed to issue new cards till the time it complies with the guidelines. Consequent to this, banks and other card issuing institutions would have to tie up with alternate card schemes like RuPay which are already complied with the data localisation regulation.

Are Visa and RuPay safe harbours now for the credit card issuers?

The debit and credit card growth is phenomenal in the last five years and hence penetration of cards has gone all-time high in the ecosystem. So, considering the current prohibition on Mastercard would help their competitors till the time Mastercard comes up with the next plan of action.

How many credit card issuers are there in the country and how will they shift their platform to Visa or RuPay?

In India, there are more than 62 million credit cards, as of May 2021. Over 50 per cent of the market share is captured by Visa, while Mastercard has about 30-35 per cent market share. RuPay is also now making a good presence in credit card issuance. Apart from them, AMEX and Diners Club also have a good presence in the premium customer segment. India has very steady growth in Credit card issuance compare to debit cards hence it wouldn't make a huge difference. But with the recent action, RuPay is likely to have an upper hand due to its strong presence in the domestic payment ecosystem. Visa also will have a definite benefit in getting new debit card issuance contracts as well.

How long will it take for them to do so?

It's almost more than three years, RBI mandated to comply with data localisation. While some of the players have complied within the given time frame i.e. by October 2018, large global players requested more time considering the complexity and issues to isolate their IT Infrastructure to ensure data residency within the country. Therefore, it is very difficult to predict how much time they may take to ensure full compliance.

The same credit card issuer is using different platforms. Why?

Banks have various reasons to select card issuance schemes considering business model, a segment they want to attract for the credit card, processing fee and other compliance parameters. One of the important aspects is business continuity in card issuance and transaction processing.