The Reserve Bank of India (RBI) directed major card networks like Visa and Mastercard to stop facilitating business payments made by corporates and small businesses through cards.
The main reason for this, as stated in the report, is that money is going into the accounts of merchants without KYC. Which became a matter of concern for authority.
RBI’s action on Visa and MasterCard
The Reserve Bank of India has ordered international card networks like Visa and MasterCard to stop transactions through
Business Payment Service Provider
This decision has come at a time when the use of digital payments is increasing rapidly in the country. The reason behind this action of RBI is not yet clear, but industry experts believe that this decision was taken regarding the flow of funds in the accounts of non-KYC merchants. Although the bank accounts of these merchants may be linked to KYC processes, they are not allowed to accept these card payments.
Visa and MasterCard’s response
Visa has given clear instructions to its customers in this regard that business merchants should be closed immediately and the transactions related to them should be stopped. Visa has also warned that if these instructions are not followed, it may result in regulatory action and compliance assessment.
Tech startups, which are directly affected by this decision, have seen it as a challenge. The founder of one of these startups said that RBI “This decision was due to confusion or misinformation. He believes that the idea of stopping transactions of services like rent and tuition may be read.”
This move comes at a time when India’s digital payments are growing rapidly through the UPI (Unified Payments Interface). UPI has overtaken traditional card networks and now handles most of the country’s real-time transactions. UPI is being used not only to connect consumers and merchants directly but also to promote indigenous card networks like RuPay.
RuPay has been allowed to process credit card transactions through UPI, which is a great opportunity for international card networks. Currently, international card networks like Visa and MasterCard are facing a big challenge from UPI and RuPay.
The rapidly increasing use of UPI and government support for RuPay have reduced the share of these companies in the Indian market to a great extent. The government has not only encouraged the use of RuPay but has also instructed banks to ensure that customers get the same benefits on RuPay cards as on other networks. As a result, RuPay cards have expanded in the market.
Conclusion:
This decision of RBI is a big step towards making the digital payment system in India more transparent and controlled. International networks like Visa and MasterCard now have to work on new strategies to remain in the Indian market. The growing influence of indigenous solutions like RuPay and UPI shows that India is moving rapidly towards making its digital payment system self-reliant.
