Mastercard Ban and its Catastrophic Impact on Banks

By | July 16, 2021
RBI Mastercard India Ban

After placing a ban on HDFC Bank, American Express & Diners Club, RBI has now placed a ban on MasterCard from acquiring new customers. This has a massive impact because it doesn’t affect one or two, but almost all banks and not just on credit cards but also on debit/prepaid card issuance. Here’s everything you need to know.

  • What’s the ban? Mastercard cannot take new customers from 22nd July’21.
  • Why? Non-compliance with Data storage policy
  • Impacts whom? All banks issuing MasterCard credit/debit/prepaid cards

While the ban goes live only on 22nd, some banks actually made it live with immediate effect as they would need time to process existing applications. As always, existing customers on Mastercard are not affected.

Who’s severely affected?

The banks that rely on MasterCard only are the ones that gets affected severely. Some of them are:

  1. RBL bank
  2. Yes Bank

RBL & Yesbank are in big trouble because they issue “only” MasterCard credit cards to my knowledge. Even biggest problem is most of their debit cards too are on MasterCard – so it affects savings Ac acquisition too.

Axis bank is also severely affected because their hot selling credit-card product can’t be issued.

Both RBL & Yesbank have started working on alternate networks to issue cards and I expect them to go live after 3 months.

That aside, if we look at the impact on card level, here are some of the best credit cards in India that got affected due to the MasterCard ban, as these cards are launched exclusively on MasterCard platform.

  1. Axis Flipkart credit card (massive hit for axis)
  2. RBL Zomato credit card (sad news for zomato)
  3. Bob ETERNA credit card (one of the best in premium segment)
  4. Axis Magnus credit card (one of the best in premium travel segment) 

There could be few other cards too that may get affected but these are the noteworthy ones that cannot be applied until the ban is revoked.

Who benefits from the ban?

If we look at the payment processor level, Visa is the biggest beneficiary of all these bans as Amex, Diners Club and MasterCard are banned. 

And of-course this may help Rupay to get some market share as well. Ideally we should start seeing credit cards on Rupay platform quite soon.

If we look at bank level, these bans gives ICICI bank a greater advantage as they play in entry-level cards segment which mostly run on visa platform.

If we look at the card level, the ICICI Amazon pay credit card is the biggest beneficiary. Among the top 4 private players, only ICICI has a wonderful product in entry-level segment that can still be issued (in bulk), because HDFC is banned, Axis flipkart card is running on MC, RBL is down as all of their cards are on MC. 

As per latest reports ICICI bank has issued over 2 million Amazon pay cards already and this move will get them to 3 million mark super fast. 

When will the ban be lifted?

It’s safe to “assume” that it might take 3-6 months.

But again I think this ban especially may not last long as it affects the entire payments space at multiple levels and also MasterCard may not need a lot of time to get things done.

So it’s highly likely to be cleared in ~3 months.

Final thoughts

It’s sad to see that the payments industry is in continuous stress since November 2020 and we never know what’s gonna happen tomorrow.

It’s quite interesting to note that Mastercard says that they’ve done the needful but disappointed with stance taken by Reserve bank of India. In their own words:

Since the issuance of the RBI directive requiring on-soil storage of domestic payment transaction data in 2018, we have provided consistent updates and reports regarding our activities and compliance with the required stipulations. While we are disappointed with the stance taken by the RBI in their communication dated July 14, we will continue to work with them to provide any additional details required to resolve their concerns.

I hope all these issues on payments industry gets solved in coming months and revert back to normalcy at-least by Year-end, so we can open a happy new year 2022, assuming Covid-19 too shows some sympathy on humans.

Author: Siddharth

Helping Indians to choose right credit cards, pick right offers and enjoy luxury vacations for less. Day & night exploring the spiritual reality of our human existence.

55 thoughts on “Mastercard Ban and its Catastrophic Impact on Banks

  1. Shamanth

    I have today received approval for SC Ulitmate Card. (on card to card baisi) I have inquired about the RBI ban and then they changed the applicatoin to Platinum rewards card. I believe they are utilizing the small window to issue as many cards as possible. I have unnecessarily poked them 🙁

    Reply
  2. SAMEERTEZ

    Sid! I have a query regarding my new RBL Credit card which was approved just yesterday and supposed to be dispatched in next 5-6 days as confirmed by RBL customer service executive, whether this ban will affect my card dispatch. Pl clarify.

    Reply
  3. Kris

    As Thala mentioned RBL, Yes and Bajaj Finser are 100% effected. HDFC has already facing ban which has around 45% master cards of their portfolio, Indusind has 40%, ICICI has 35%, SBI has 10% . I think it effects all banks its bumper offer for Amazon pay which runs on Visa platform and can acquire market share to huge numbers.
    I feel Rupay has good opportunity here to gain some market and lets see how it goes.

    Reply
    1. Bhavin

      It should not affect HDFC at all as they are not allowed to issue any new card..LOL…

      Reply
      1. Ramanan Subbiah

        HDFC will no longer be able to upgrade their existing credit card holders on MC platform.

        Reply
        1. Ishant

          Thank God. Finally I’ll get a respite from continuous calls for upgrading my RF to millenia

          Reply
  4. Deb

    Applied for BOB ETERNA CARD online on the date of ban. Video KYC done on 15.07.2021.
    Whether card will be issued?
    Met all eligibility conditions.

    Reply
  5. Akram Khan

    I think it’s a quite harsh directive by RBI since Indian banking system is already under pressure due to some or the other reasons, and this decision will further the trouble to Indian card issuers on the platform and would be a big blow in acquiring new business. It will also impact and limit the choices of consumers and will reduce the market competition, resulting in downgrade of Credit and Debit card products. I hope if RBI can find some other alternatives to punish to those not able to comply with its regulations.

    Reply
  6. AbhiKohli

    Now that is a bold move by RBI especially given that Diners & AmEx already had prohibitory orders running. Though the move is disheartening, but the onus clearly lies on MasterCard for the mistake. Strong message need to go out that if you are doing business, you need respect the law and from 2018 to now already lot of time was given. They are free to issue any statement but then if they would have complied and RBI still hands them a ban, they could have gone for a court/stay order. It is evident that they have falter and now doing a face saving exercise

    Reply
    1. Rahil Shah

      Absolutely. Certain laws were applicable. They didn’t follow it. Matter ends there. Trying to justify by giving comments and press releases does not solve the problem.

      Even in their statement, they have not mentioned that they have adhered to the law. They have merely stated that they were providing “updates and reports” to RBI! Now that does not, in any manner whatsoever, absolve them of their duties and responsibilities. If they are doing business in India, they have to follow the local law!

      Reply
  7. Deepak.S

    The credit card industry has become a temporary duopoly now. I hope they won’t raise their transaction charges to make more money out of customers.

    Reply
    1. Anu

      Ban is only for applying new master card not on existing master cards

      Reply
    1. Praveen C

      Why? I work for an international airline solutions company and I know how stringent European cardholder data regulations are. It’s time RBI took a stand for our security. It’s a totally justified action by them especially 3 years after passing the regulations.

      Reply
  8. Mahesh S. Panicker

    An obvious beneficiary would be Visa. Have they managed to make the necessary changes according to the RBI guidelines? The alternative is hard to even contemplate! A world of only RuPay cards?! But it in all seriousness, this is a great opportunity for RuPay. So far, most of the private banks haven’t really been taken in by RuPay. Of significant credit card providers, its only been SBI that has RuPay, and those cards haven’t been great and they have mostly been co-branded. Lets see whether RuPay will up the game.
    More importantly, hope MasterCard gets their act together soon.

    Reply
  9. Anshul Kothari

    I think the ban is justified – for 3 years, they are sending updates but not becoming compliant. Now, they are banned, I am sure they will only take 3 months to become complaint (It’s no longer a choice for them now..)

    Reply
  10. The Quintessential Poor

    Wonder if VISA store all their payment data in India.

    Reply
  11. Vishnu Sreenath

    This had to happen sooner or later. RBI have send out a strong message when they banned HDFC, AMEX and now MasterCard. Everyone was taking the rules pretty casually and extending the deadline stating some or the other reason. It was never a priority for any banks or card issuers. Now they will all get the point. Either get in line with the guidelines ASAP and be ready to face the consequences. As a consumer I’m happy as this protects our data and provide consistent services to us without any outages and other issues.

    The only downside is it limits our number of options to choose from. But I’m ok to wait for a few months. As of now I’m pretty confident almost everyone will have at least one card with them be it credit card or debit card. Plus we have UPI, wallets and other digital means to get around this ban period in case of no cards.

    Reply
  12. Priyesh Sharma

    Don’t worry, I am from the Network operations background and Visa is also at the same position where amex and mastercard where, very soon visa will also be impacted.

    Reply
  13. Kamal

    Regarding Axis entry level cards, Axis Ace is a wonderful product exclusively on Visa platform . So axis will survive this wave . Rbl and yes bank will get affected in customer acquisition for short time .

    Reply
    1. Harshit

      100% agreed.

      For my usage, that card makes more sense than the Axis Flipkart card or even the ICICI Amazon card. However, use case may differ for other users.

      Reply
  14. Aryan S. Dalal

    I’m looking forward to applying for IndusInd pinnacle card, maintained balance for 3 months solely for that. Sad to hear that and also angry at RBI.

    Reply
    1. Ravi

      Most of the small and medium establishments prefer UPI as there is no MDR upto 2k. Even those merchants who used to accept credit cards earlier are shifting/preferring UPI nowadays

      Reply
  15. Varun

    I recently got the HDFC Regalia Mastercard. Can I apply for an add-on card for this, and its associated Priority Pass? Will such be issued?

    Reply
  16. Pratik

    Idxots are sitting at RBI. Penalty should always fit the crimx.

    They could have charged hefty penalties for violation of order. Atleast RBI/ Govt would have gotten some funds. This is a loss for all, not to mention all administrative costs to be incurred by Banks for getting their act together.

    Such a loss !!!

    Reply
    1. Raghu

      True – the biggest losers with this RBI’s action are the card issuers (banks) and customers.

      However, the problem with fines in India is that they can be contested in courts. MC will first go to the Indian supreme court and then the international court and so on, dragging the issue for years/decades.

      One thing for sure is that this is huge negligence from MC.

      Reply
  17. Insider

    While I’m surprised by MasterCard not complying with the RBI directives, I can assure that Visa has already provisioned data centers in India – Mumbai and blr and storing/processing settlement data in India. Its a bit of a old news as this is done more than 6 months back. I wonder where other commenters are getting their info from.

    Reply
  18. sid

    credit/debit cards are dead horses all hail UPI, stop debit/credit card usage it is past the due date…..

    Reply
  19. Amit Kumar

    Applied for bob eterna on 7th july. Also have account with BOB. Now i am worried they will approve or not.

    Reply
  20. Jey

    My HDFC MC credit card is due for renewal in a month. Will it be renewed as MC variant?

    Reply
    1. Siddharth Post author

      Usually yes, as they just extend the validity.

      Reply
    2. Arun

      They will renew your card even if it is MC card also no worries. I got my MC hdfc card 2 months back…

      Reply
  21. Prasenjit Narwade

    Though personally I hope that the ban gets revoked quickly, There could be a silver lining to this. From Geopolitical standpoint, I really hope that Rupay gains some ground as a result of this move. Its important to have an India based payment service system and we should encourage it. Back in 2014, Master Card and VISA blocked Russian bank customers (Howzaat for hypocrisy!) . And this was purely geopolitics in play (US and Russia relations are well known). So it brought the entire backing system in Russia to standstill. I think it was as a result of Crimea annexation. The annexation itself was right or wrong is a different story, US used its power to blackmail Russia. Although our relations with US are not bad today, but we should have our options available. We shouldn’t leave ourselves in a position where one country be it US or China blackmails us into submission tomorrow.

    Reply
  22. Raja

    Does this ban apply for renewal cards (i.e. both debit and credit cards)? If so, if my debit card expires, then can I not use my card to withdraw funds anymore? Is this situation same for HDFC debit cards as well since all their cards are banned?

    Reply
      1. Raja

        OK. Yes, just got my renewal ICICI debit card of MasterCard yesterday…

        Reply
  23. Naveen

    Hey Siddharth, how did you get Zomato Edition card, i am witnessing this since last one year, the website always says ‘Coming Soon’ also the RBL bank site says its available only in few cities. Where is it available if not in Delhi, Mumbai n hyderabad.

    I could not find anyway to apply for it anyhow

    Reply
    1. Saurabh Patel

      There was an option in my Zomato App to apply for it for a while.

      Reply
  24. Anonymous

    I have been working with MasterCard since 4 years now (as a service provider) and their implementation would require atleast ~2 months to go live .

    They have been working since the directive from RBI came into place, and yes they are working on war footing at their end.

    Reply
  25. Akram Khan

    As per the information from a Yes Bank credit card executive, this ban will be revoked by RBI from 1st of August. Now let’s see.

    Reply
  26. Raviraj

    MasterCard, Visa and Amex will be soon kicked out by Indian government to bring in rupay platform so that it creates income for them.

    Reply
  27. Raviraj

    We are becoming atmanirbhar by letting only rupay survive

    Reply
  28. Arun

    According to me Axis credit card experience is the worst one I have ever seen. They should deserve ban instead of HDFC. Foolish customer care not aware of the own bank product details. Stupid charges and rounding rewards value and so on… Not sure about RBL.

    Reply
    1. Dr. Abhishek Gupta

      I fully agree with you. In my Flipkart-Axis Bank Credit Card, these jokers have given me only 1.5% cashback on my purchase of an iPhone 11 from Flipkart, as against the eligible 5% cashback on this card on Flipkart as per the terms and conditions of the Flipkart-Axis Bank Credit Card. I have been struggling with Axis Bank for the last 3 months to get the balance Cashback of Rs. 1715 and had to escalate the complaint to their Principal Nodal Officer. But still, they are just giving false promises.

      Reply
  29. Baljinder Brar

    I applied for Yes Bank DC after 1 or 2 days of ban
    Got the visa card today so i don’t think there DC business is affected.
    Note sure about CC

    Reply
  30. Abhishek Chatterjee

    Yes bank signed agreement with RuPay to issue credit cards, says Yes Bank’s Prashant Kumar.

    We have already signed an agreement with RuPay and we are expecting to sign an agreement with Visa by next week. We are expecting to start issuing credit cards in 90-120 days,” says Yes Bank’s Prashant Kumar.

    Reply
  31. Abhisek chatterjee

    After Yes bank, Federal Bank in talks with RuPay and Visa for onboarding new credit card users.

    Federal Bank and Yes Bank are in discussions with Visa and RuPay to restart issuances of credit cards over the next two to three months.

    Reply
  32. Ajai Singh

    I was reissued a YesBank Exclusive today after I lost my card in a taxi. The replacement card is a mastercard and not a visa.

    Reply
  33. AG

    I’ve applied for Indusind Pinnacle card (With fees) before this ban. Indusind took its own sweet time to process the application, and the ban has come into effect by then.

    So, Indusind without informing me has proceeded to issue a Legend credit card, which I am not interested in.

    How do I best deal with this situation?
    Thanks.

    Reply
  34. ATHUL ABRAHAM

    It’s just dirty politics by RBI. Instead of this, let them first sort out the mess caused by platforms like Mobikwik, where lakhs of user data KYC was sold on dark web. Instead of that, banning a brand that has had no security concerns until today, is just India trying to push “Made in India” move, in an unethical way. Very shameful.

    Reply
  35. Barath

    I currently hold an Infinia MC, what will happen if I lose/miss my CC somewhere? Will they send a Visa variant of the CC or any other plan?

    Reply

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