Deluge and Dilemma : The co-branded card saga

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The Reserve Bank of India recently issued a circular citing how the current nexus of card networks (Visa, Mastercard, American Express) and issuers (banks and other entities) affects a customer’s choice-making. 

Currently, this selection is already made for them by virtue of their chosen card issuer or bank.  But now, RBI wants to hand over these reins to the customer, letting them decide which card network they want, for all their debit, credit and prepaid cards. 

Notably, a card issuer/bank generally has  tie-ups with multiple card networks. But this move by RBI singled out the co-branded card segment in a tizzy, given that they are born out of an exclusive branding agreement between the issuer and the network. The industry is curious as to how this will function post October 1, 2023, when these directives are set to come in effect? 

For instance, Axis has tied up with Flipkart for a co-branded card, with Visa as their network. The Amazon-ICICI card also has Visa as their provider. In such a case, if a customer gets an Amazon co-branded card, will he decide if he wants it from Mastercard, Visa or Rupay? 

According to media reports, despite the apex bank being uneasy with such exclusive arrangements, the popularity of co-branded cards refuses to die. Seen as an easy way for banks, card networks and platforms (usually related to airlines, online shopping) to expand their user base. Additionally, these cards offer good discounts, cashbacks, and rewards. They can be obtained without any paperwork and come with no joining and annual fee, making it a popular holding amongst youngsters. 

Food delivery behemoth Swiggy recently announced its partnership with HDFC bank in launching a co-branded card. Its rival, Zomato, had earlier withdrawn from this space. Apple is also planning to launch a credit card in India, in partnership with HDFC bank.