Mastercard Ban and its Catastrophic Impact on Banks

Update: Mastercard Ban was lifted on 22 June 2022

After placing a ban on hdfc bank,American Express $ dinner 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:

RBL bank
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.

AXIS FLIPKART CREDIT CARD (massive hit for axis)
RBL ZOMATO CREDIT CARD (sad news for zomato)
BOB ETERNA CREDITD CARD(one of the best in premium segment)
AXIX MAGNA 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.