Credit Card Portability: What are its benefits, and how will it impact current Indian credit card users?

The Reserve Bank of India in one of its recent circulars has made a proposal to allow customers to change their credit, debit and prepaid card networks. One of the significant elements of the credit card portability concept involves the ability to switch or port your card networks. The credit card portability facility will be effective from October 1, 2023.

This newfound freedom won't be limited to credit cards but will also extend to your debit and prepaid cards. Credit card portability provides cardholders the flexibility of selecting the best service, which will eliminate the limitations set by credit card issuers earlier.

The Intricacies of a card network

Think of a card network as a sturdy financial network allowing seamless transactions between merchants and card issuers. Its role is central to the approval, clearing, and settling of card transactions.

Within the Indian context, the prime credit card networks are Visa, MasterCard, American Express, Diners Club International, and homegrown RuPay, administered by the National Payments Corporation of India.

Card network portability

The Reserve Bank of India (RBI), in its draft circular, is nudging card issuers (most commonly, banks) towards some interesting alterations. Specifically, it suggests card issuers should avoid restrictive agreements with card networks that limit their access to the services of other networks. This move could well see card issuers broadening their horizons, reaching out across a more diverse range of card networks.

In addition, RBI states that card issuers must offer their customers the choice of any one among multiple card networks available. This choice could be made at the card's issuance or any subsequent time.

Impact of card network portability

Currently, card networks join forces with banks and non-banks to distribute debit, credit, and prepaid cards. The card issuer is the key player who decides the card network affiliation—whether it be Visa, MasterCard, RuPay, and so forth. This arrangement has often left customers with little choice in the matter, requiring them to accept the card network chosen by their bank or card issuer, irrespective of their own preferences.

Customer advantages with card network portability

The RBI's new proposal heralds a significant change for cardholders. They'll now be able to transfer their cards from one network to another. As card issuers extend their services across a wider network, customers will have the freedom to select not only their card, but also their preferred card network. This choice can be exercised either at the time of card issuance or later.

Further, this change is expected to intensify competition among card networks. With customers now having the freedom to choose their card network, each network will likely strive to deliver superior services and enticing perks to retain and attract cardholders. This competition could, in turn, lead to enhanced customer benefits, lower costs, and an overall improved customer experience.

It's worth pointing out that while card network portability is on the horizon, switching banks isn't quite the same1. Moving an existing card to a different issuer may prove a tricky task as new banks can have different eligibility criteria for card types and associated perks.

RBI has sought public feedback and suggestions on the card network portability proposal until August 4, 2023. However, based on the feedback that the RBI receives, the final rollout date could be nudged a bit further.