Foreign card payment network
- July 17, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Foreign card payment network
Subject: Economy
Context: Reserve Bank of India has so far barred three foreign card payment network companies — MasterCard, American Express and Diners Club — from taking new customers on board over the issue of storing data in India.
Concept:
According to RBI data, there were 90.23 crore debit cards and 6.23 crore credit cards in India as of May 2021. There were 57,841.30 lakh debit and credit card transactions valued at Rs 12.93 lakh crore
- The RBI imposed restrictions on citing non-compliance with guidelines for storage of data in India. It had given three years for MasterCard to comply with the regulatory directions.
- Existing customers using a credit card or a debit card with the payment network can continue using
RBI guidelines stipulate
- By the RBI circular on Storage of Payment System Data, all system providers were directed to ensure that within six months the entire data (full end-to-end transaction details, information collected or carried or processed as part of the message or payment instruction) relating to payment systems operated by them is stored in a system only in India.
- They were also required to report compliance to the RBI and submit a board-approved system audit report conducted by a CERT-In empanelled auditor within the timelines specified
Conditions Prevailing
- Credit and card firms with global operations have been resisting the move, citing costs, security risk, lack of clarity, timeline, and the possibility of data localisation demand from other countries.
- Payment firms like Visa and MasterCard, which currently store and process Indian transactions outside the country,
- the data storage to India will cost them millions of dollars
- The RBI is against the suggestion that a copy of data stored outside be brought to India.
Role of card networks
- Firms such as MasterCard, Visa and National Payment Corporation of India (NPCI) are Payment System Operators authorised to operate a card network in India under the Payment and Settlement Systems (PSS) Act, 2007.
- Under the Act, the RBI is the authority for the regulation and supervision of payment systems in India.
- The RBI’s payment system enables payments to be effected between a payer and a beneficiary and involves the process of clearing, payment or settlement, or all of them.
- Funds transferred using debit or credit cards are routed through platforms such as Mastercard, Visa and NPCI.
- The RBI has decided to allow non-bank entities — Prepaid Payment Instrument (PPI) issuers, card networks, White Label ATM (WLA) operators,
- Trade Receivables Discounting System (TReDS) platforms will become members of the centralised payment system (CPS) and effect fund transfer through RTGS and NEFT.