Mastercard will no longer be able to issue new cards from July 22: RBI – .

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Mastercard will no longer be able to issue new cards from July 22: RBI – .


MUMBAI: Showing courage on the issue of data localization, the Reserve Bank of India on Wednesday banned Mastercard from onboarding any new domestic customers from July 22.
The directive prohibits the US-based network from issuing prepaid, credit or debit cards to new customers on its network in India. The RBI said the order would not impact existing Mastercard customers.
Mastercard is India’s second-largest credit card issuer (after Visa) and the central bank’s tough stance could have implications for foreign relations. The RBI has been pushing all regulated entities to store data relating to Indian customers on Indian soil since April 2018.
“Despite a considerable time frame and adequate opportunities being given, the entity was found to be non-compliant with the payment system data storage instructions,” the RBI said in a statement.
Although it is the banks and financial companies that issue the cards, they partner with either Mastercard, Visa or RuPay for the use of the network. Each time a card is swiped, processing takes place in the payment network’s cloud. Mastercard has been tasked with advising all issuing and non-bank banks to comply with these instructions.
“Mastercard is fully committed to respecting our legal and regulatory obligations in the markets in which we operate. Since the issuance of the RBI Directive requiring domestic payment transaction data to be stored on the ground in 2018, we have provided consistent updates and reporting regarding our activities and compliance. with the required conditions. While we are disappointed with the position taken by the RBI in its July 14 communication, we will continue to work with them to provide any additional details necessary to resolve their issues, ”the company said.
In terms of number of employees, India ranks second among all markets for Mastercard. The company has invested $ 1 billion in India and has announced plans to invest another $ 1 billion.
“Building on our significant and continued investments in India, we remain committed to working with our customers and partners to advance the government’s vision for digital India,” the statement added.
Mastercard is the third U.S. company to face an RBI ban after American Express and Diners Club, which faced similar restrictions in April. Amex said that while it is not accepting new applications, it is committed to complying with all regulations.
Banking sources said Visa had complied with data localization standards, which is why the payment network was not subject to any restrictions. Compliance forced the company to build storage capacity in India, which required investments of “hundreds of millions,” sources said. Mastercard has repeatedly requested more time.
Sources said the payment network may be waiting for personal data protection laws to be put in place. Suresh Ganapathy, Research Analyst, Macquarie Capital, said: “The main concern is that credit cards, which are a profitable product for banks, could be affected as banks will now have to switch to a Visa or RuPay platform. , which will take time. Our conversations with bankers reveal that it could take two months for the new payment platform (say Visa) to issue new plastics and take the extra capacity released by Mastercard.
The payments network advocated for allowing data mirroring because transaction information was needed to determine fraud trends. The company’s argument was that if Indian transaction data is disconnected from the world, the Indian market will not have the advantage of global trends.
The RBI directive appears to have come as a surprise to Mastercard. As late as July 8, Mastercard announced the launch of a “One Mumbai Metro Card” in partnership with Axis Bank and Mumbai Metro. Other industry players were also shocked that MasterCard had agreed to comply.
Local storage standards do not apply to payments for which a stage of the transaction is offshore. The RBI standards also allow data to be sent overseas for processing, but it must be deleted from overseas servers before the end of the day. The challenge here is that wherever data is sent overseas, the RBI wants an audit report certifying that the data is deleted.



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