India has recently announced their decision to ban Mastercard from issuing new debit and credit cards in the country, although this ban will not affect existing customers of Mastercard. The ban is effective 22 July. On July 14, the Reserve Bank of India (RBI) said that the US-based Mastercard had not complied with the data storage rules from 2018 that require foreign card networks to store Indian payments data within the country so the regulators can have “unfettered supervisory access”.
So, how will this new ban spell out India?
The banks in India mostly issue four types of debit and debit cards: Visa, Mastercard, Maestro (a part of the Mastercard enterprise), and RuPay. Out of these, only RuPay is owned by Indian entity. It was launched in 2012 and was created to fulfil the RBI’s vision of establishing a domestic, open and multilateral systems of payments.
Based on an analysis by Reuters, the ban on Mastercard will disrupt banks’ card offerings and its revenue, payments and banking industry. The ban is. Similar to a move to ban American Express in April, however, in this case, Mastercard has a much more dominant presence in the Indian market, where many lenders offer cards using the US firm’s payments network. According to Reuters, out of 11 domestic and foreign banks in India, Mastercard accounts for about a third of roughly 100 debit cards on offer, and more than 75 credit cards variants used its network.
One banking executive said the switch to Visa could take as long as five months. And with American Express and Mastercard prohibited, Visa gets an unprecedented advantage in negotiations in a credit card market it already dominates.
“It will mean temporary disruption for banks, a lot of hectic negotiations and loss of business in the short term,” said one of the sources, a senior Indian banker told Reuters.
Mastercard has counted India as a key market as it has invested $1 billion from 2014 to 2019. In 2019, it announced a $1 billion investment over the next five years. Besides that, Mastercard also has research and technology centres in India, where its workforce of 4,000 is the second largest after the United States.
Following a ban on American Express in April, many customers flocked to RuPay. By November 2020, RuPay was already a dominant player in the market with share of around 60 per cent. Many believe that similar trend will follow after Mastercard’s ban.