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US payment institutions in India are breaking the data rules



Top US payment companies are locked in a stalemate with regulators in India following a deadline for adherence to stringent new international data transfer rules for e-commerce users in the country.

Visa, Mastercard and American Express have seen India as a major potential growth market, which has been moved by authorities to move the country away from cash transactions.

But they fiercely opposed the rules announced by the Reserve Bank of India in April to halt the storage of Indian user data at sea until midnight on 15 October.

RBI's localization rules are among the most difficult to observe by the authorities in terms of national data supervision. Data sovereignty laws, which sometimes include land-based data retention requirements, are being proposed across Asia.

The US payment institutions said that the October 1

5 deadline would be impracticable as it would require major changes to their systems

The central bank refused to postpone the deadline, so that companies would lose their time Tuesday were in limbo as they waited to see if they would be punished for violating the rules. Visa, Mastercard, American Express and the Reserve Bank of India have refused to comment.

A person close to one of the US companies said they had made some changes to their systems was now considered compliant with the new rules. The person declined to provide details about the changes, but confirmed that Indian payments were still processed abroad.

"This is a global phenomenon and I think it will stay here," said Jayanth Kolla, co-founder of Convergence Catalyst, a consultancy. "Data will be the biggest tool for businesses to sell services and products, and governments believe it is their duty to protect the data around their citizens."

The US payment companies complained that the rules would increase their costs without improving the security of Indian card users who would no longer benefit fully from their global anti-fraud systems. They proposed a "mirroring" approach that would store the data both in India and at sea, giving full access to local authorities.

A recent draft directive on e-commerce Similar rules for data localization in this industry – a move that would hit Amazon and Walmart, which would block the acquisition of Indian e-commerce. Commerce group Flipkart announced $ 16 billion.

The data localization measures should be seen in the context of wider trade relations with the US other key economies, said Sivarama Krishnan, India cyber security chief for PwC. Restricting the activities of foreign companies in the Indian market could be a useful "trade negotiating tool," he said.

Others warned of the threat of US retaliation – a potential threat to India's huge IT service industry, which relies heavily on the transfer of data from other countries to India.

Beyond the data localization movements, the dominance of US payment institutions in India is being threatened by a fast-growing, self-selected alternative, RuPay. It was launched in 2012 by the National Payments Corporation of India, an Indian-owned joint venture, and has received strong government support. It claimed 459 million vending machine transactions in the year to March, an increase of 135 percent over the previous year.

"If we use other cards, they will go to foreign countries, but in this case they will remain in India," said Prime Minister Narendra Modi to the local media in June.


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