SBI Credit Card has co-branded credit cards with TATA Capital and Club Vistara on the Mastercard platform
Card issuance by banks and credit card issuers that have co-branded credit cards with vendors on the Mastercard platform or exclusive tie-ups with the payment network for their own credit card issuance will take a hit for the time being now that the Reserve Bank of India (RBI) has barred Mastercard from onboarding new customers over non-compliance with local data storage regulations.
Axis Bank, which is one of the largest credit card issuers in the country, has a co-branded credit card with Flipkart on the Mastercard platform. Similarly, SBI Credit Card has co-branded credit cards with TATA Capital and Club Vistara on the Mastercard platform. RBL bank also has a co-branded credit card with Bookmyshow on the Mastercard platform.
“The issuance of co-branded cards with Mastercard will also stop due to RBI restrictions. If a particular Mastercard co-branded credit card has a high contribution to the overall mix of a credit card player, it will have a higher impact on the issuer’s business growth”, said ICICI Securities in a research note.
When it comes to individual credit card issuers, according to ICICI Securities research, SBI Card, HDFC Bank, Axis Bank, Citi Bank, and Kotak Mahindra Bank have tie-ups with both the global card players Visa and Mastercard. Only RBL Bank and YES Bank have exclusive tie-ups with Mastercard.
RBL Bank has already issued a statement saying that it has entered into an agreement with global card player Visa yesterday to issue credit cards enabled on the Visa payment network. The bank is expecting to start issuing credit cards on the Visa payment network post the technology integration, which is expected to take 8 to 10 weeks. YES Bank may also follow the same path that RBL has taken but so far they have not given any information on their further course of action.
HDFC Bank, which itself, has been barred by the RBI to issue new credit cards following repeated data outages also has tie-ups with both Visa and Mastercard for credit card issuances. But, it also has co-branded cards with vendors such as Indigo and Maruti Nexa exclusively on the Mastercard platform.
Experts believe that RBI action may hamper the issuance of cards in the near term for private banks which have exclusive tie-ups with Mastercard for promoting spending. There could also be a small hit on other income as no incremental cards can be issued. Banks are taking stock of the situation and preparing responses.
Public sector banks, on the other hand, will not be impacted as they are increasingly issuing cards on the RuPay network, India’s homegrown indigenous card payment network.
Mastercard is a payment system company, operating a card network in the country under the PSS Act. Along with Mastercard, Visa, and RuPay are the other big card issuers in the country. Visa is the largest player in the space followed by Mastercard and RuPay, according to industry estimates. But Mastercard is seen as having a premium position in the industry. RuPay, which accounts for nearly 35 per cent of the cards market share, is seen as a disruptor, fast catching up with its global peers. While Visa and Mastercard are big players in the credit cards segment, RuPay has cornered a large chunk of the debit cards segment.