Tag: mastercard

Data storage norms: Mastercard submits audit report to RBI

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After being banned by the Reserve Bank of India (RBI) from issuing new cards, US-based payments technology major Mastercard on Friday said it has submitted an audit report to the regulator showing compliance with the local data storage norms.

The RBI had on July 14 put an indefinite ban on Mastercard from issuing new credit, debit and prepaid cards. The ban came into effect from July 22.

The restrictions were put in place because of the company’s failure to comply with local data storage norms that require payments companies to store data related to Indian customers only in the country.

“When RBI required us to provide additional clarifications about our data localisation framework in April 2021, we retained government-empaneled Deloitte to perform a supplemental audit to help demonstrate our compliance.

“We have been in a continued dialogue with the RBI from April through the report’s submission on July 20, 2021,” Mastercard said in a statement.

The company said since the RBI’s 2018 directive on data localisation and storage, it has worked closely with the central bank and Indian government to ensure that Mastercard is compliant with both the letter and the spirit of the order.

“This includes submitting reports as required by the RBI. We look forward to continuing our conversations with the RBI and reinforcing how seriously we take our obligations. We are hopeful that this latest filing provides the assurances required to address their concerns,” it said.

Further, the company said it is committed to put in whatever resources are required to meet any additional requirements raised by RBI and bring this matter to a close “expeditiously”.

“In the meantime, we remain focused on ensuring our current business continues to operate as usual, working in lockstep with our customers and partners to minimize any impact on cardholders,” it added.

Mastercard, a major card issuing entity, is the third company to have been barred by RBI from acquiring new customers over data storage issues, after American Express Banking Corp and Diners Club International.

RBI had said that Mastercard was found to be non-compliant with the directions on ‘Storage of Payment System Data’ despite being given adequate opportunities.

However, the regulator had said the ban on issuing new cards was not going to impact the services of the existing customers of Mastercard in India.

Mastercard is a payment system operator authorised to operate a card network in the country under the Payment and Settlement Systems Act, 2007 (PSS Act).

RBI’s circular on Storage of Payment System Data on April 6, 2018 had directed all system providers to ensure that within a period of six months the entire data relating to payment systems was stored only in India.

They were also required to report compliance to RBI and submit a board-approved System Audit Report conducted by a CERT-In empanelled auditor within specified timelines.

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Mastercard submits new audit to India after ban over data handling, BFSI News, ET BFSI

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Mastercard has submitted a new audit report to India’s central bank, it told Reuters, as it seeks to overturn a ban on card issuance linked to concerns over the U.S. giant’s handling of data processed abroad.

The Reserve Bank of India (RBI) on July 14 sent panic-waves through Indian banking partners by announcing a ban, effective from July 22, to prevent the U.S. giant from issuing new cards. It cited non-compliance with 2018 rules that required it to store payments data only in India.

The RBI imposed the ban after deciding a “system audit report” submitted by Mastercard’s auditor Deloitte in April was unsatisfactory, three sources familiar with its decision-making said, asking not to be named because of the sensitivity of the issue. Two of the sources said the RBI was reviewing the new report.

In a statement to Reuters, Mastercard said Deloitte performed a “supplemental audit” and a new report was submitted on July 20 to the RBI, six days after the ban was announced.

“We look forward to continuing our conversations with the RBI and reinforcing how seriously we take our obligations. We are hopeful that this latest filing provides the assurances required to address their concerns,” it said.

Deloitte declined to comment, citing confidentiality obligations. The RBI did not respond to a request for comment.

The sources said the RBI was concerned Deloitte’s audit did not clearly state how long Mastercard took to purge Indians’ card data that is processed abroad before being stored locally.

India’s 2018 rules do not restrict where the data is processed, but for “unfettered supervisory access”, the RBI mandates that within a day the data – including transaction details and amount – should be stored domestically.

Mastercard in 2018 said it had started storing data at a facility in India’s western city of Pune to comply. But it still processes a part of each Indian transaction through data centres abroad, and later transfers and stores that data in Pune, one of the sources said.

The RBI has given no details beyond a seven-line statement announcing the ban. The details of RBI’s concern with Deloitte’s submissions have not previously been reported.

American Express, whose Indian presence is much smaller than that of Mastercard and Visa, has also has been banned from issuing new cards since April for violating the 2018 rules.

A fourth person with direct knowledge of the matter said the RBI had given Mastercard multiple extensions to submit clarifications and RBI only issued the ban when Mastercard asked for more time when an extension to July 9 lapsed.

Mastercard did not comment on the extension and the situation in Pune.



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Mastercard to file an independent audit report

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In a bid to get the ban on issuing new cards revoked, payments major Mastercard is planning to submit an additional audit report by an independent agency to the Reserve Bank of India to show its compliance with the data localisation norms

According to sources close to the development, Mastercard has already submitted to the RBI its annual System Audit Report showing compliance with the data norms, but there were delays in sending a supplemental audit report due to which the central bank barred the company from issuing cards.

The company hopes the additional report will address the RBI’s concerns and enable Mastercard to go back to business as usual, said a source.

Reports rejected

According to banking industry sources, the initial system audit report was found to be deficient by the RBI. “The compliance by Mastercard was not satisfactory. The company had been dragging its feet on meeting the regulatory norms,” said a source aware of the regulatory processes.

Mastercard is understood to have taken time in submitting a third-party audit report on compliance with data localisation norms and had not appointed a domestic auditor certified by CERT-in. A part of the payments data on the Indian leg of the transaction being processed abroad was not deleted within the mandated 24 hours.

‘Slight delay’

To an email query from BusinessLine, Mastercard said: “When RBI required us to provide additional clarifications about our data localisation framework in April 2021, we engaged our government- empanelled, audit firm to address those points. That report was slightly delayed and submitted to the RBI on July 20, 2021.”

“We are hopeful that this latest filing provides the assurances and insights required to address their concerns and move toward a resolution on the matter,” it said, adding that it is focussed on ensuring that its current business continues to operate as usual.

“Since the RBI’s 2018 directive on data localisation and storage was issued, we have worked closely with the RBI and the Indian government to ensure we are compliant with both the letter and the spirit of the order,” Mastercard said.

Mastercard has been betting big on the Indian market with plans to invest $1 billion over a five year period to build digital payment infrastructure and work on innovations in the digital payments space.

It has also been one of the largest players in terms of issuances for cards and plans of many banks have been impacted by the ban.

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RBI’s ban on Mastercard likely to create monopoly in India’s credit card market, BFSI News, ET BFSI

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The Reserve Bank of India’s (RBI) ban on Mastercard is likely to create a near monopoly in India’s credit card market, with the US-based card network Visa likely cornering a significant chunk of the new business that earlier went to its global rival.

While homegrown platforms are expected to gain modestly, Visa’s superior reward offerings to merchants and the government’s zero Merchant Discount Rate (MDR) rule on National Payments Corporation of India (NPCI) is likely to put Visa in an advantageous position.

Private lender HDFC Bank, which is currently facing its own ban on onboarding new card customers, already has plans to roll out debit cards under Visa and RuPay.

“Mastercard is a significant franchise partner for the bank, but the good part is like in most of our businesses, we patronise on open architecture,” said Sashidhar Jagdishan, MD, HDFC Bank. “Whether it’s for cards, insurance, mutual funds, we distribute a lot of company products. Even in cards, we have a lot of franchisees – Visa, Mastercard or Rupay. So, until the ban on Mastercard is lifted and when our ban is lifted, the new cards could be on either of the platforms.”

According to a source, several leading co-branded partnerships such as those of Flipkart and Axis Bank and Indigo and Kotak Mahindra Bank were on Mastercard as well. These contracts are now expected to go to Visa.

Another area where Visa can prosper is the up and coming commercial credit card space where Mastercard and Visa currently have cornered the entire market. “These are typically cards issued for corporate purchases and spending on these cards go up to Rs 500 crore a month for large sized companies,” said a payments executive. “RuPay doesn’t have any exposure in this space; therefore, almost all new contracts on this piece are expected to be landed by Visa.”

Visa is also likely to have an upper hand in getting new debit card issuance contracts as well. The central government’s zero MDR rule on RuPay debit cards means that private sector banks that were tying up with Mastercard will almost exclusively move to Visa.

“Banks cannot make money through RuPay debit transactions. Unless there is a mandate as with public sector banks, most others won’t be compelled to shift their card issuance network to RuPay as it won’t make them any money. This puts Visa in a seriously advantageous position in the Indian market,” said an industry official.

On the debit card, most leading banks have multiple tie-ups with all three major card networks and internally switching the issuance infrastructure would not be a major challenge. However, for certain banks such as RBL Bank and Yes Bank which had exclusive tie up with Mastercard, RBI’s new diktat could affect their plans.

RBI doesn’t disclose the share of Mastercard and Visa in the overall payments system. Most banks have both Mastercard and Visa and in some cases RuPay as their payment platform for cards.

“We have already taken note of the situation and will soon be moving to the Visa platform for most of our debit and credit card requirements,” said another private lender that had co-branded with Mastercard. “But we believe that the onboarding to a new platform could take about two months.”



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NPCI in talks to take UPI, RuPay to global markets, BFSI News, ET BFSI

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National Payment Corporation of India (NPCI) is in talks with several global agencies to expand the global footprint of indigenous payment networks RuPay and UPI (unified payment interface), possibly in West Asia, the United States, and Europe.

“We are aiming to expand RuPay and UPI acceptance across world destinations, where Indians travel for holidays, study or profession or even stay,” said Ritesh Shukla, chief executive of NPCI International Payments (NIPL), a wholly-owned subsidiary of NPCI for international business. “We are in talks with global agencies through which we are looking to introduce RuPay and UPI to the world.”

Those international agencies may include regulatory authorities, large banks, fintech companies, or even umbrella payment organisations from respective countries.

Some of the likely destinations include Gulf countries like Saudi Arabia, the UAE and Bahrain, European and North American countries, Mauritius and Singapore, payment industry insiders said.

Shukla did not disclose names of agencies NIPL is in talks with, but a senior payment industry executive told ET, “US-based Zelle or The Clearing House could well be partners.”

Zelle Network is a payment platform in the US that deals with banks and credit unions while The Clearing House Payments Company operates core payments system infrastructure in the US.

Zelle Network and The Clearing House did not reply to ET’s queries as of press time Sunday.

The development comes at a time when global payment giant MasterCard is facing regulatory roadblocks in India.

The Reserve Bank of India had last week banned MasterCard from issuing new cards for non-compliance with data storage localisation rules. The development will likely prompt some banks using its services to reach out to RuPay, industry experts said.

RuPay already holds more than 60 per cent market share in terms of number of cards in India, outpacing both MasterCard and Visa which had till recently dominated the turf.

Launched in 2016, UPI reported a 285 per cent compounded annual growth rate (CAGR) in payment volume since 2017 to hit $457 billion in 2020.

To take UPI payment system to global markets, NIPL would be reaching out to tie up with existing QR (quick response) code infrastructure operators.

RuPay acceptance can be made available through point of sale (PoS) terminals and ATMs.

Bhutan recently became the first country to adopt UPI standards for its QR code. It is also the second country after Singapore to have Bhim-UPI acceptance at merchant locations, NIPL had said last week.

Both UPI and RuPay are payment services delivered through NPCI’s multi-rail payment network.



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MasterCard bar not to impact HDFC Bank

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The recent ban on MasterCard on acquiring new customers will not impact HDFC Bank as it has pacts with other payment platforms including Visa and RuPay. “Mastercard is a significant franchisee partner for the bank. But we patronise on open architecture for products including cards, insurance and mutual funds where we distribute products of a lot of other companies also,” said Sashidhar Jagdishan, Managing Director and CEO, HDFC Bank.

Responding to queries of shareholders at the bank’s Annual General Meeting on Saturday, Jagdishan said the bank has multiple franchisees for cards including Visa and RuPay. “The bank is protected in having a failover mechanism,” he said, adding that until the ban on MasterCard is lifted and as and when HDFC Bank’s embargo is lifted, the new cards can be on either of the other platforms.

The RBI on July 14 took supervisory action against MasterCard and barred it from acquiring new customers (debit, credit or prepaid) from July 22 for not complying with data localisation requirements.

Jagishan said the temporary embargo on the bank by the RBI on sourcing new customers for credit cards has impacted the run rate on acquisition of customers. The bank has also made a lot of progress in terms of complying with the regulatory directive and the technology audit is also over. Jagdishan said that as and when the RBI feels comfortable in lifting the ban, HDFC Bank will bounce back.

Internet outages

On outages in the bank’s internet and mobile banking services, Jagdishan said these happen globally as well. He, however, said the recovery time from the outage for the lender is longer.

“Recovery time is not the global average, it is beyond a threshold level where customers get impatient,” he said, adding that it was a valid reason why the regulator took action against the bank. The bank is working to minimise these issues, he said. On a query on monetisation of HDB Financial Services, he said there is no immediate plan to do so.

“The pandemic has had a huge impact on HDB Financial Services…We would like to wait… we may try to discover the price initially but in the medium term, we want to watch how it recovers and at that time think about listing it on the exchanges,” he said.

Chairman Atanu Chakraborty said the Enterprise Technology Factor and the Digital Factory that have been put in place will work as the core backbone.

The bank has also set up a new business segment of commercial for micro, small and medium enterprises and rural banking that will capture the next wave of growth, he said in his address to shareholders.

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RBL, Yes Bank, Bajaj Finserv most impacted by RBI curbs on Mastercard, BFSI News, ET BFSI

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New Delhi, After the Reserve Bank of India (RBI) restricted Mastercard from on-boarding new customers, among the credit card issuers, including co-brand partners, RBL Bank, Yes Bank and Bajaj Finserv are the most impacted as their entire card schemes are allied with Mastercard.

Japanese brokerage Nomura said in a note that these three entities are the most impacted by the RBI move.

HDFC Bank has 60 per cent of its card schemes tied to Mastercard, Amex and Diners, while for Axis Bank and ICICI Bank, this is about 35-36 per cent.

“That said, we don’t know the individual card schemes’ contribution to the overall profitability of the issuers to assess the potential impact,” it added.

HDFC Bank is already restricted from issuing new cards, and hence is not incrementally impacted. On the other hand, Kotak’s card portfolio is entirely allied to Visa and hence it won’t face any issues.

The managements of both Axis Bank and ICICI Bank have in the recent past talked about their cobranded cards with Flipkart and Amazon, respectively, to be the fastest-growing card schemes. These card schemes are 14 per cent and 15 per cent of outstanding cards for Axis and ICICI, respectively.

While the Amazon ICICI card is allied to Visa, the Flipkart Axis card is allied to Mastercard, and hence is a potential medium-term risk, should the current status-quo continue, Nomura said.

The RBI on Wednesday restricted Mastercard Asia/Pacific Pte Ltd from onboarding new customers across all its card products (debit, credit and prepaid) from July 22, 2021.

The RBI had earlier put similar restrictions on both American Express Bank (Amex) and Diners Club International (Discover Financial Services).

“This leaves only Visa Inc and homegrown NPCI’s RuPay as payment providers under no restrictions currently. We don’t know if Visa has fulfilled all the requirements of data localisation as envisaged in the Storage of Payment System Data circular of the RBI,” Nomura said.

“In the near term, we don’t foresee any material impact on card issuers (especially credit card issuers), but there could be a medium-term impact if this situation persists,” it added.



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Mastercard ban to hit banks’ card operations, income

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India’s decision to ban Mastercard Inc for non-compliance with data storage rules has unsettled the country’s financial sector as it will disrupt banks’ card offerings and hit revenues, payments and banking industry executives told Reuters.

Wednesday’s central bank order followed similar action in April against American Express, but Mastercard is a much bigger player in the Indian market, where many lenders offer cards using the US firm’s payments network.

A Reuters analysis of online card listings of 11 domestic and foreign banks in India showed Mastercard accounted for about a third of roughly 100 debit cards on offer, and more than 75credit card variants used its network.

RBI action on Mastercard: SBI Card sees minimal impact on its new customer acquisitions

From July 22, the Reserve Bank of India (RBI) said, new issuance of such cards will stop as Mastercard did not comply with 2018 rules requiring foreign card networks to store Indian payments data locally for “unfettered supervisory access”.

Though existing customers will not be hit, business impact will be significant as banks need to sign new commercial deals with rival networks such as Visa, a process that can take months and involve weeks of back-end technology integration,five payment and banking executives said.

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.

“This is consistent with our considerable and continued investments in our customers and partners in India to advance the government’s Digital India vision,” Mastercard said in a statement on Thursday.

Bar on Mastercard: YES Bank, Bajaj Finserv, RBL to be most affected

The decision is a major setback for Mastercard, which counts India as a key market. In 2019, Mastercard said it was “bullish on India”, announcing $1 billion in investment over the next five years, after investing $1 billion from 2014 to 2019.

Mastercard also has research and technology centres in India, where its workforce of 4,000 is the second largest after the United States, having grown from 29 in 2013.

High card usage, income impact

Indians’ use of credit and debit cards has risen as digital payments have spread. By May, RBI data shows, there were more than 62 million credit cards and about 902 million debit cards,which together accounted for transactions worth $40.4 billion.

The delays in transition to Visa are also seen hitting bank fees and other incomes they generate from their cards business,the sources said.

In a research note on RBI’s decision, Macquarie flagged as a “key concern” the risk that banks could suffer as credit cards were a profitable product with a so-called post-tax return on assets of around 5-6 per cent.

Some banks, such as India’s RBL, lists 42 credit cards on its website, all using the Mastercard network, while Yes Bank lists seven using Mastercard, though none on Visa. The Citibank website offers four Mastercard credit cards.

RBL said in a statement on Thursday that it had reached a pact with Visa for its credit cards after the RBI order, but integration would take up to 10 weeks.

One of the sources said, however, that negotiations for the deal had taken six months.

RBL said it had a share of five per cent in the credit card market but its issuance of 100,000 new cards each month could potentially be affected. Its stock fell more than three per cent in early trade.

Yes Bank in a statement said it is “evaluating migration to other platforms for seamless transition” for issuing new credit cards. A Citibank spokesperson told Reuters it was working with its partner Mastercard “to evaluate any potential impact”.

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RBI action on Mastercard: SBI Card sees minimal impact on its new customer acquisitions

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SBI Card, the country’s largest pure play credit card issuer, on Thursday said that it will comply with the latest RBI directive that restricts Mastercard from onboarding new customers from July 22. However, SBI sees this having minimal impact on its new customer acquisitions as there are only a few co-brand credit cards on the Mastercard network.

“We will be complying with the latest RBI directive that restricts MasterCard from onboarding new customers from July 22, 2021. We have a diversified product portfolio on multiple networks, viz. Rupay, Visa, Mastercard and American Express. Our new customer acquisition impact is minimal as there are only a few co-brand credit cards on the Mastercard network. All our proprietary products are available on multiple networks”, a SBI Card spokesperson said.

This comes a day after RBI on July 14 took supervisory action against Mastercard and barred it from acquiring new customers (debit, credit or prepaid) froSBI Card July 22 for not complying with data localisation requirements.

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Mastercard ban gives opportunity to RuPay, digital credit card firms, BFSI News, ET BFSI

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The ban on Mastercard for onboarding new customers by the Reserve Bank of India is set to hit new card issuances in the country, and give an opportunity to other players like Visa and RuPay to raise their market share.

Indian banks may see card spends and new card issuance take a beating after the RBI ban on Mastercard.

Mastercard’s has a one-third share of the Indian card market where Visa is the biggest player. The ban may also impact credit card spends, which are already down due to the Covid pandemic.

Banks have been swift to move on with RBL announcing a partnership with Visa just a day after the ban on Mastercard.

Digital credit card companies that use multiple tech innovations and do not rely on Visa, Mastercard rails are also likely to gain. They use UPI, which is said to have a larger acceptance for both P2P and P2M payments.

RuPay cards

India’s indigenous payment network RuPay has cornered a significant market share in the domestic card market since its launch. As of November 30, 2020, RuPay’s market share has increased to more than 60 per cent of total cards issued, from merely 17 per cent market share in 2017, according to RBI data.

As of November 2020, around 603.6-million RuPay cards have been issued by nearly 1,158 banks. But a majority of these are debit cards and only 970,000 are credit cards.

The number of debit cards issued in the country between 2010-11 and 2019-20 increased from 227.8 million to 828.6 million, of which around 300 million were RuPay debit cards issued to basic savings bank deposit account holders.

On the other hand, during the same period, the number of credit cards issued also increased from 18 million to 57.7 million.

The value of transactions for debit cards is lower than credit cards. In credit cards, Visa and Mastercard are at the top with the value of total credit card transactions in PoS system being much higher than the value of all debit card transactions. The government has also been pushing banks to focus more on RuPay cards and provide them as the first option to customers.

With this ban, RuPay can target high-value credit card transactions, which are dominated by Visa and Mastercard.

The Mastercard ban

In a major supervisory action, the Reserve Bank on Wednesday indefinitely barred the US-based Mastercard from issuing new credit, debit and prepaid cards with effect from July 22 for its failure to comply with data storage norms.

Mastercard, a major card issuing entity in the country, is the third company to have been barred by RBI from acquiring new customers after American Express Banking Corp and Diners Club International over data storage issue.

In a statement, Mastercard said it is disappointed with the stance taken by RBI.

The RBI, however, clarified that its supervisory action will not impact the services of the existing customers of Mastercard in the country.

Announcing the ban on Mastercard, RBI said, “notwithstanding lapse of considerable time and adequate opportunities being given, the entity has been found to be non-compliant with the directions on Storage of Payment System Data“.

Mastercard is a payment system operator authorised to operate a card network in the country under the Payment and Settlement Systems Act, 2007 (PSS Act).

In terms of RBI’s circular on Storage of Payment System Data on April 6, 2018, all system providers were directed to ensure that within a period of six months the entire data relating to payment systems is stored only in India.



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