Is Ban A Fair Move By The Regulator?

Several Founders, Co-Founders, CXO Bankers, CXO Fintech professionals & people who participated in the ePanel discussions:

Mr. Kamonasish Aayush Mazumdar, Founder & CEO at Foodieverse
Mr. Vinod Shah, CIO/GM, Scheduled Apex Bank
Mr. Narayanan S, General Manager Business Solutions, Associate Director, Principal Consultant, Cognizant
Mr. Prashant Sinha, General Manager-Banking, India Transact Services Limited
Mr. C V Ramana Rao, Sr Manager, Punjab National Bank
Mr. Chitti Babu, Global Head- Payments & Digital Solutions, Unimoni
Mr. Shailesh Varudkar, Chief Business Officer, VTION Media Analytics
Mr. Arun Tanksali, Co-founder & CTO, Nearex
Mr. Subbiaa Olimuthu, former Product Manager RuPay Product, NPCI
Mr. Jayaram M, Consultant (Partner), Basil Capital
Mr. Hemal Shah, former Technical Product Manager, Mastercard
Mr. Ruchir Inamdar, Head of Business Development, Repute
Mr. Rukmani K Narayan, VP Internal Audit, Equitas Small Finance Bank
Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
Many other CEO/CXO Bankers & Fintech professionals on FIAKS Forum requested to remain anonymous

So recently a supervisory action against Mastercard has been taken by RBI. Restrictions were imposed on Mastercard Asia/Pacific Pte. Ltd. from onboarding new domestic customers (debit, credit, or prepaid) onto its card network on account of non-compliance of directions on Storage of Payment System Data. However, there would be no impact on existing customers of Mastercard. ^[1] Also, as on the Visa network, a member assumes that they won’t be quite far from expecting some repercussions on similar lines. ^[2]

What do these directions on Storage of Payment System Data state? ^[1]

RBI had issued a circular on April 6, 2018, through which all system providers were directed to ensure that within a period of six months the entire data (full end-to-end transaction details/information collected/carried/processed as part of the message/payment instruction) relating to payment systems operated by them is stored in a system only in India. In addition, they were required to report compliance to RBI and submit a Board-approved System Audit Report conducted by a CERT-In empanelled auditor within the timelines specified therein.

Fair or unfair rule?

Yes, this seems to be a fair ruling, a good move by RBI. Anyways long term they are slipping due to UPI, etc
With a short-term view, this is understandable and needed to convey strongly that the law of the land is supreme. The law is what it is and everyone has to comply.
Seen through a longer perspective, the law is perhaps shooting ourselves in the foot. The implication of the law is that “outsiders will steal our data”. What will RuPay do if it has to be really global or perhaps a new-gen scheme, like UPI or something from the NUEs? How can the government bat for our services to expand internationally when its singular focus is on denying others rather than enabling ours? The US government goes around talking of open internet access, etc, and doesn’t kill their companies by creating laws if replicated elsewhere will do exactly that. We need that same view and push for enabling legislation everywhere.
The same cards that bend before other countries try to act big when it comes to India. The simplest thing India can do is to allow these cards for international use only. RuPay can be promoted locally. Both the cards will fall in line.
We can’t allow foreign cards to hold us to ransom. Before our cards became international, we had all foreigners and NRIs use their cards in India. Indian credit cards were allowed only in India. Not even Nepal. To improve RuPay should not be a problem for a country that plunged into digitization removing 75% of its currency in one go. And to help the 5% of the population who travel abroad, permit Master or Visa or Diners to issue them. Once faced with massive volumes of business the Master and Visa by themselves will come with alternatives along the lines.

Talking about RuPay?

Does RuPay have the infrastructure to handle international transactions? Does the RuPay network support acquiring of other network cards also? If we stop the issuance of Mastercard, will they allow our networks to switch to them?
The time has come to look for strengthening RuPay credit card which as we see in the column is either zero or single digit.
Member mentions, the nationalized banks have started replacing Visa/Master with RuPay. I have a PNB Rupay debit and credit card. PNB issues international cards only upon specific requests.
A member feels, why hung up on international travel RuPay? Let it be India only. Master and Visa and Amex can operate for international travel. No one can object to data being kept outside India for such individuals. Indian Government can ask for transaction data of such individuals. If Visa can do it, why not Master? This bullying must stop. Same with Twitter, forget India – they appropriate the right to judge in the USA. Facebook too. They must follow Indian laws or get out.
- China has shown the way.
- Arabia has shown the way.
- Australia has shown the way.
- Why are we so scared? And our country is supposed to be a powerhouse in IT!
RuPay in any case has captured almost 65% domestic market share. Let NPCI see this as a big opportunity to work out plans for the same on a fast track basis! Exchange Mastercard for Rupay card. Come on we can find a method!

Some concerns and complications that pose up;

RBI needs to fine Mastercard if they want them to follow some rules. Not allowing the issuance of cards demonstrates a lack of thought and high-handed behavior. If not Mastercard do we want to issue JCB (Japan Credit Bureau) or CUP (China Union Pay) cards! JCB is co-branded with RuPay, CUP has no direct or co-brand option right now. The left out option is Visa and RuPay for time being. Well, Rupay is not internationally accepted. This can trigger a Visa monopoly prompting higher charges, interchange, etc.
If we decide to log out of Mastercard how will settlement happen? Also what about renewals of existing Mastercards? There would be 100s of renewals daily. Well, the RBI circular mentions existing cards won’t have any impact. Settlement/chargeback isn’t the issue. Only new card issuance by way of NTB (New To Bank) customers will be an issue. For existing customers Mastercard can still be issued as renewal or replacement, only first card issuance won’t be allowed.
So how will they track if a new card is being issued or renewed or replaced? For both renewal and replacement, new cards are issued. So any bank can issue a new card saying it is renewal or replacement. If renewal and replacement are not allowed then we are opening a new front for trouble. Well, you’ll always have audit trail for these things. Renewal or replacement will have a base card that was replaced while the new card has no history.
But RBI will have to get the list from banks and track it manually. As per a member’s understanding card issuance is not reported to any regulatory body. So scanning through a list of cards issued to find out whether renewal or new will be difficult. Also, banks would have produced plastics for these cards and kept them. If this law continues for a while then banks will have to destroy these plastics. Also not sure if this will have an impact on pre-launch approved BINs for new card products.

Some more perspectives that came in;