The sovereignty of Data and the Mastercard


“The world’s most valuable resource is no longer oil, but data,” published ‘The Economist [1]’on May 6, 2017. The five corporate titans—Alphabet (Google’s parent company), Amazon, Apple, Facebook, and Microsoft all thrive on one important resource,‘Data’.Not just the biggest companies in the world, but even for normal companies, the data in the cloud prevents instincts from clouding the judgment of the decision-makers. In the modern information age, data is more than just an economic and political resource, an important factor of production.

The Rise of Data Politics

The looming importance of data politics could be understood by studying the US-China trade war,which has relegated Huawei from the largest selling mobile company [2] in the whole world to 5thplace in China [3].The strategic interactions between sovereign states and non-state actors (corporate houses) over the collection, processing, transfer, sale, or use of datais what data politics [4] is all about. Dynamics related to digital technologies, algorithms, and network securityis a growing matter of concern and control for many sovereign states.

Data Storage – RBI’s Concerns

To process refunds, recurring bills, and for reporting purposes, Card Holder Data (CHD) which includes the 16-digit primary account number, cardholder name, service code, and expiration date, etc are stored by the payment gateway players. Most of this data collected from payments in India used to be stored, in a cloud, outside India. But with the data localization laws in many countries like the US and China India also realized its importance.

To ensure that the privacy of the users is not compromised, and the payment channel is not misused for illegal activities, the RBI needs unhindered supervisory access to data stored by thesystem providers, intermediaries, and third-party vendors. Such access could be possible only when the data is stored in India. 

RBI’s Imperatives

Through its circular dated April 6, 2018, RBI [5] had directed all system providers to ensure that the entire data (full end-to-end transaction details/information collected/carried/processed as part of the message/payment instruction) relating to payment systems operated by them is stored in a system only in India. Six months’ time was given for compliance. System providers were required to submit the System Audit Report (SAR) conducted by CERT-IN empanelled auditors once the requirementhad been complied with.

Apathy, Reluctance, and the Consequence

MasterCard failed to comply with the norms. The time of six months initially given was stretched to three years [6], and finally,after Mastercard failed to comply with the norms, it was restricted from enrolling new domestic customers onto its card networks from July 22, 2021.In April 2021, the RBI had imposed similar restrictions on American Express Banking Corp and Diners Club International Ltd from May 1, 2021, for the same reason.RBI has also started issuing new guidelines (Feb. 2021) to the online merchants, e-commerce websites, and payment aggregators regarding storing of card details of a customer online [7].

The Road Ahead

Five private sector banks, including Axis Bank, Yes Bank, and IndusInd Bank, which rely mostly on MasterCard, were impacted by this RBI’s decision. As the decision doesn’t affect the existing cards, credit spending and opening of new accounts with few banks would be affected, which, the banks were estimated to recoup within a quarter.RBI also started actively pursuing banks to activate business continuity plans (BCPs) after it banned Mastercard.The vacuum created in the market by the ban of Mastercard would be filled by the Visa Card network and Rupay. While the GOI backed Rupay will lure those customers whose payments are mostlydomestic, Visa will appeal to the customers with international spending. Nationalised banks will push Rupay,but the superior reward offerings [8] to merchants and the government’s zero Merchant Discount Rate (MDR) rule on National Payments Corporation of India (NPCI) is likely to get Visa better acceptance from the conscious customers and private banks.

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Discussion Questions

Do you think digital wallet is a threat to card business? Why?

Source Articles

 [1]       News, “The world’s most valuable resource is no longer oil, but data,” The Economist, May 6, 2017.

[2]        S. Silver, “Huawei Is Now the World’s Top-Selling Smartphone Brand, Overtaking Samsung,” The National Interest, 3 August 2020.


[4]        L. Liu, “The Rise of Data Politics: Digital China and the World,” Springer, 19 March 2021.

[5]        RBI/2017-18/153, “Circular,” RBI, April 6, 2018.

[6]        Editorial, “Card games: Faced with non-compliance with its regulations, the RBI had little choice but to crack down on MasterCard,” The Hindu Business Line, 20 July 2021.

[7]        P. GILL, “RBI wants you to memorise all your debit and credit card numbers — Amazon, Zomato, Netflix and others argue this will make online payments more tedious,” PRABHJOTE GILL, February 24, 2021.

[8]        A. Manikandan, “RBI’s Mastercard ban likely to create monopoly in credit card market in India,” The Economic Times, July 21, 2021.

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