In an attempt to avoid tighter guidelines on credit card issuances being implemented, banks have been issuing add-on credit cards on varied card networks, to reduce the reliance on one network and to offer customers more choice.
Typically, add-on or supplementary credit cards are issued in the name of a spouse, parent or child, to enable them to use the card against a common credit limit for both cards. The primary card holder has to seek the add-on card and maintains complete control over card spends.
However, banks are now using this as a means to provide options to card holders. They are offering add-on cards to primary cardholders on card networks other than the original card, to convince customers and the regulator of sufficient choice being on offer, industry participants told businessline.
If the final norms are issued, card issuers will also be barred from entering into any arrangement with card networks that restrain them from availing of the services of other card networks.
In a draft circular issued in July 2023, RBI had asked debit, credit and prepaid card issuers to issue cards across more than one card network, and provide customers the option to choose from multiple card networks at the time of issue of the card, or at any subsequent time.
Industry players had then suggested that issuing multiple versions of every card would not be economical, and would not serve any purpose as most of the value-added benefits and rewards on card spending are backed by issuers and not networks. The biggest feedback received was to allow issuance of add-on cards on a network of choice, if the sole objective is availability of options.
While these norms were stipulated to be effective from October 2023, absence of further communication from RBI and/ or the lack of final guidelines, has meant implementation has been scattered and has made issuers hopeful that the central bank may have accepted the industry’s suggestions.
“The thought is that RBI seems to have acknowledged that the points made are valid, and thus may not choose to make it mandatory, or may at least tone it (the norms) down. But banks are also cautious and don’t want to err on the wrong side of regulations,” a senior payments official said.
With 55-60 per cent of the credit card market being dominated by Visa, most major PSU and private banks such as SBI, ICICI Bank, HDFC Bank, Federal Bank, IndusInd Bank, have rolled out add-on cards for existing cardholders on the Mastercard and RuPay networks. This includes ‘UPI-RuPay’ add-on cards for the additional benefit of UPI on credit card and National Common Mobility Card (NCMC) prepaid cards -- both of which are currently only available for RuPay cards.
For new card issues too, banks are looking at similar strategies to toe the regulatory line and cater to the requirement of certain customer segments. IndusInd Bank recently launched two new RuPay credit cards specifically for government and corporate employees, whereas Indian Bank launche a co-branded card with FPL Technologies on both the Visa and RuPay networks.