CNP: Credit Network Portability

Wonder what is ‘CNP’ in the title?

It’s Card Network Portability – the newest regulation from Reserve Bank of India for the benefit of customers.
Just as we experienced the benefits of Mobile Number Portability (MNP), India is now moving on to Card Network Portability (CNP). RBI recently unveiled a draft regulation that grants debit, credit and prepaid card holders the authority to select their desired card network, which in itself is a major global revolution.

The Background

Uptil now, the general practice was that the authorized card networks tied up with Banks/NBFCs for issuance of credit/debit/prepaid cards.
The above took away the flexibility of customer choosing his/her preferred card networks as it was based on the arrangements made between the card networks and the issuer.
Authorized card networks like American Express, Banking Corp, Diner’s Club International, VISA, Mastercard, NPCI’s Rupay etc. are prevelant in India, however, the customer never had the freedom to choose their preferred and required card network and had to go with the one decided by the issuer.

What is Card Network Portability?

It refers to the freedom and ability of the cardholder to choose their preferred network provider for debit-credit cards. 

1. RBI’s Rationale behind this move

a. RBI found it necessary to protect public interest and in turn also benefit the payment systems to introduce the CNP mechanism whereby the customer can choose and pick his/her preferred card network based on his/her requirements.
b. As a result, in the draft circular on July 5, 2023, RBI directed card issuers namely banks and finance companies to provide customers with multiple network options.
c. With this draft, the RBI also made it clear that it aims to make card usages safer and convenient to customers along with enhancing competition and flexibility in the market. 

2. RBI’s Mandated Directions

a. Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks. 
b. Card issuers shall issue cards across more than one card network. (Applicable from Oct 1, 2023)
c. Card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks. This option may be exercised by customers either at the time of issue or at any subsequent time. (Applicable from Oct 1, 2023)
d. Card issuers and card networks shall ensure to adhere to the above requirements in: 
    I. existing agreements at the time of amendment or renewal thereof, and 
    II. fresh agreements executed from the date of this circular.

3. How will this benefit the customers?

a. The first-time card users will have a variety of cards to choose from.
b. Card holders have the flexibility to migrate to a different payment network while retaining their existing card accounts, balances and credit history.
c. Enables consumers to transfer their card accounts from one network to another according to their needs and requirements.
Eg: Those who have to go for frequent International Travels and hold a card that’s not widely accepted in the country they are travelling, can port the card to a network which is widely accepted internationally.

4. When can a customer port the card?

CNP can be done:
a. During the issuance of new cards
b. At the time of renewal of the existing/expired card
3. In fresh arrangements after the circular date 

Currently, RBI has invited opinions, feedbacks and suggestions from the stakeholders till August 4, 2023.
But it’s a tough timeline to follow for banks and NBFCs as they have less than 90 days to October 1, 2023 – the implementation deadline to incorporate the CNP option in existing agreements or for renewal and fresh issuances of cards.

India and the Card Network Portability – Does it matter?

India is riding the growth trajectory, wherein as a nation, India has seen a huge credit card outstanding in FY 2022-23
The Central Bank’s data states that,
a. Credit card outstanding has soared to ₹ 2 lakh crores, which is 29.7% rise on Y-o-Y basis. The private and public sector banks in India have issued 8.65 crore credit cards till April 2023.
b.  Monthly Credit card payments are over ₹ 1 lakh crore per month, reaching to ₹ 1.32 lakh crore in April 2023

Conclusion

The Central Bank’s pioneering move of CNP will enhance customer’s confidence in RBI and extend larger responsibilities of better service qualities and affordability for issuers and card networks. This in turn also become a ‘Caveat-Emptor’ for customers as tough competition will bring in many advantages and disadvantages of its own.
However, on the first cut, we feel it’s a win-win situation for customers, issuers and card-networks if used rightly and smartly. So, India, gear up for CNP as “India kare nayi shuruat, Card Network Portability ke Saath”