What will be the effect of the ban on Mastercard on your debit and credit cards from 22 July 2022; Who will benefit the most in foreign Visa and domestic RuPay?

What will be the effect of the ban on Mastercard on your debit and credit cards from 22 July 2022; Who will benefit the most from foreign Visa and domestic RuPay?

* Let us tell you that from July 22, 2022, Mastercard will not be able to make new customers in India.
* RBI imposed a ban for not following the rules related to data storage.

Let us tell you for information that if you are using a debit card and credit card, then it is possible that you will also be aware of this news. MasterCard will no longer issue new cards in India with effect from July 22, 2022. The Reserve Bank of India has imposed a ban on not following the rules related to data storage, that this card i.e. Mastercard is a US company, which has a 33% share in India's card payment market.

After this action of RBI, many questions are arising. Why is Mastercard not following the rules? What is the impact of this ban on those who already have Mastercard? How much can banks in India be affected? Who is going to benefit the most from this ban? Now, how much damage will this cause to Mastercard and can this ban be removed?

There is also a law in India named the Payment and Settlement Systems Act 2007. Companies like Mastercard, Visa and NPCI also operate the card network under the same law. Talking about the fund transfer of debit and credit cards, then these routes are through these companies. Let us tell you that RBI has been made the payment authority to keep an eye on these.

RBI had issued a circular on April 6, 2018, in which all payment network companies were instructed to store all types of data within 6 months only in India. In such a situation, after implementing it, the companies had to get audited and also submit the report to the RBI.

More than three years have passed since this circular was issued. Let us tell you that in April, RBI also banned American Express and Diners Club. In such a situation, they do not have many customers in India, so there was not much discussion. Now after the ban on Mastercard, there was turmoil in the banking sector.

Why are foreign payment networks not following the rules?

Payment firms like Mastercard say that they operate in more than 100 countries and their storage system is also centralized. Companies fear that they may have to spend millions of dollars to transfer data storage to India. If this is done in India, then other countries can also raise the demand for local storage of data.

Card firms with global operations are citing expenses, security threats, ambiguity and timelines for non-compliance with RBI norms. According to Kazim Rizvi, founding director of think tank The Dialogue, this decision of RBI is a big step to give effect to the law related to data storage.

Naveen Kukerja, co-founder and CEO of Paisa Bazar.com, says, “Banning is the last resort. This means Mastercard's talks with RBI have come to a standstill.

It is not yet clear whether Visa has done data transfer in India following the RBI norms.

What is the impact of the Mastercard ban on old customers?

Older customers using credit and debit cards from MasterCard, American Express and Diners Club can continue to use them for payments. RBI's ban will not have any effect on the old customer. However, banks and non-banking finance companies cannot create new customers until the RBI lifts the ban.

How much will the banks be affected by this ban?

Yes, Bank, RBL Bank and Bajaj Finserv have been affected the most by this ban, as their entire card scheme was linked to Mastercard. 60% of HDFC Bank card schemes are linked to MasterCard, Diners and American Express. 35-36% of ICICI and Axis Bank cards are linked with MasterCard.

Naveen Kukreja says, “Some banks may suffer losses for no fault of theirs. For example, the entire network of Yes and RBL Bank is based on MasterCard. Now it takes at least 8-10 weeks to tie up with new networks like Visa and RuPay and back-end support.

A senior banker says that the banks will suffer a loss in business immediately. This is also a big setback for MasterCard. In 2019, Mastercard announced an investment of $1 billion in India over five years.

RBL has said in a statement that after the RBI order, they are entering into an agreement with Visa, but the integration may take 10 weeks. RBL issues around 1 lakh cards every month, which will be affected. Yes, Bank and Citibank are also evaluating migrating to other platforms by leaving Mastercard.

Who will benefit the most from this ban?

Most banks in India have four types of debit and credit cards: Visa, MasterCard, Maestro and Rupay. Naveen Kukreja says alternative networks like Visa and Rupay will benefit from the Mastercard ban. Banks will enter into new agreements, which will increase their market share.

Ashutosh Mishra, Head of Research, Ashok Stock Broking, says that Visa and Rupay are the only two big channels left after Mastercard is banned. Most of the banks are now tying up with more than one payment company. Most of the public sector banks are offering Rupay cards and private banks are offering Visa cards.

The second big benefit of the ban can also be the Unified Payment Interface (UPI). It is being seen as a replacement for the card. The payment process of UPI is easier, faster and more secure. Along with this, there is no transaction charge on payment through this.

Can this ban be removed?

Mastercard has a research and technology centre in India, which employs 4,000 people. Online payment analyst AP Hota believes that Mastercard may not be refusing to follow the RBI guidelines, but the process may be getting delayed. After following the guidelines, the ban can be removed from Mastercard. Naveen Kukreja says that if the ban is lifted in 4-5 months, the company will not be affected much, but if it increases, then a large share will be lost from the market.