India’s Ban on Mastercard to Impact Banks’ Card Operations and Income: Sources

India has decided to ban Mastercard, which might affect other banks’ card operations

India decided to ban Mastercard on the grounds of non-compliance to the data storage rules, which saw it impact the banks’ operations and the income if they issue those cards.

Central Bank issued a similar notice against American Express, but MasterCard is a much bigger player in the Indian market as the lenders have preferred to give away Mastercard credit/debit cards to their customers. India’s Ban on Mastercard to Impact Banks’ Card Operations and Income: Sources

The RBI said that from July 22, the issue of Mastercard credit/debit cards shall stop as they have not followed the 2018 guidelines of storing your information locally for “unfettered supervisory access”.

Though the existing customers will not be hit, it would still impact the businesses as it would take at least 5 months to make all the deals with Visa, since, with the ban of American Express and Mastercard, Visa has become the undoubted competitor in the credit card market.

This means it is a temporary disruption of the market along with the hectic negotiations and work. This decision causes a major setback on this card, as it has invested over $1 billion in its Indian market between 2014 and 2019.

Mastercard also has Research and Technology centres in India the second biggest of their after the one in the US, which started with 29 in 2013 to 4000 currently.

High Card Usage will Now Impact Incomes

With the rise of digital payments, the usage of credit and debit cards has increased, with over $40.2 billion transactions made up until May, reported the RBI.

The transition to Visa will see a dip in the banks’ overall businesses. Some credit card incomes total 5%-6% of the banks’ income, this transition would be a very difficult period as then there will be losses suffered.

Some backs in India such as RBI lists 42 services on their website using the Mastercard, Yes Bank lists 7 – but none on Visa. Citibank also offers 4 MasterCard online services.

RBI had a 5% share in the credit card market, but now with this their 100,000 cards per month could see them at losses, and as a result their stocks also decreased by 3%.

Yes Bank has issued a statement saying they will be looking for other platforms to ensure seamless transfer of the deal and have it done as soon as possible.

Citibank has also made a statement saying they were in contact with their MasterCard to discuss the kind of Impact it may have on both of them.

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