The Impact of Regulatory Compliance on the Card Industry

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The current regulatory landscape for the card industry, the costs and opportunities of compliance, and the impact on the stakeholders.

Cards continue to remain the primary non-cash payment instrument, accounting for 40% of the global market share in 2010 according to the World Payments Report 2012 from Capgemini, RBS and Efma. Along with the rise in card usage, demand for privacy, security, convenience, and transaction speed has also grown. This has led to an increased focus on regulations aimed at achieving these goals. Consumer protection, fraud prevention, and standardization are the major drivers for regulations in the card industry. Regulations such as the Durbin Amendment, Unfair and Deceptive Acts and Practices (UDAP), and the Credit Card Accountability Responsibility and Disclosure (CARD) Act originated in the U.S. with consumer protection as their primary goal. European regulatory authorities focused mostly on standardization and fraud prevention by creating standards such as Europay MasterCard Visa (EMV) and SEPA Cards Framework (SCF). Countries such as China, India, Singapore, and Malaysia have initiated their own domestic payment networks which are likely to challenge the global networks.

In this paper, we discuss the drivers behind regulations across the card industry, the opportunities that can come from regulatory compliance, the impact of regulations on each player in the card industry, and the impact of regulations on non-banks.