Segment Performance

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					               INDUSTRY SURVEY


Contents                                                                                         Page No.

         Foreword                                                                                              02
    1. Credit Cards                                                                                            03
    2. Debit Cards                                                                                             11
    3. ATMs                                                                                                    16
    4. Merchant POS Terminals                                                                                  20
    5. Prepaid Cards                                                                                           23
    6. M-commerce                                                                                              26
    7. E-commerce                                                                                              29
    8. Key Trends                                                                                              31

All information contained in this report is the property of Venture Infotek Global Private Limited. Reproduction
of information, tables, charts etc is permitted subject to the condition that the source is acknowledged as
follows: ―Source: Venture Infotek Research‖

Additional copies:
This report can be viewed on our website:
Additional copies of this report can be requested by sending an email to

The data presented is based on feedback from relevant people in various banks. It has not been validated
with actual records. Wherever published information was available it has been used. The views expressed by
the bankers might be their own and may be coinciding with that of the Bank. The analysis done is purely on
the data collected and the views expressed thereof are on the basis of the analysis. In certain cases, where
data was not forthcoming, best effort estimates have been used.

It is indeed a privilege to present the Annual Payment Card Industry Survey 2010. At the outset, we
are grateful to all the industry players who have provided us with their valuable time and
information towards completion of this survey.

The year 2009-10 had been another challenging year for the global economy and financial sector.
India, while fundamentally in a much stronger position, has also experienced the impact of these
events in many sectors. The number of credit cards in India during the year ended March 2010
declined to 185.46 lakh from the previous year card base of 246.99 lakh. The debit card base
increased from 1,374.31 lakh in March 2009 to 1,815.37 lakh by March 2010. The number of credit
cards and debit cards together were 2,000.83 lakh as on March 2010 with an increase of over
379.53 lakh cards in the year, registering a growth rate of 23% in the financial year 2009-10.

The card acceptance infrastructure has been growing at positive pace, registering a merchant
terminal base of about 4.76 lakh and ATM base of over 60,000 in the year.

As always, we would like to thank all those who have forwarded us their valuable suggestions,
comments and feedback on the surveys conducted till date. We assure you that we will continue
our concentrated efforts and strive to maintain the high quality of our survey year on year.

About us:
Venture Infotek ( is India‘s premier consumer payment processing
company, providing integrated end to end card issuance and payment processing solutions for
both issuing and acquiring banks.

Venture Infotek manages payment card and other transactions emanating from over 190,000
merchant locations in India. Venture Infotek processed 150 Mn transactions with a commerce
value of ` 35,000 Cr. (USD 7 Bn) in the financial year 2009-10.

The cards and fulfillment division of Venture Infotek, with the largest state-of-the-art secure card
personalization bureau in India has a capacity to personalize around 48 million cards per annum.

We have built the Indian card processing industry and today command an impressive share of the
market. Since 1997, Venture Infotek has successfully devoted its founding years in building this
massive and largely scalable infrastructure for enabling electronic payments in the country.

We would like to thank Ms. Kiran Agrawal, Manager and Ms. Rashmi Partoti, Consultant at Venture
Infotek for their invaluable efforts in producing this report.

We look forward to your suggestions and feedback. Please mail your suggestions to


P Ravindra
General Manager
Venture Infotek Global Pvt. Ltd.

Segment Performance
The growth in issuance of credit cards by banks may not be significant in near future due to
uncertain economic conditions at a global level which also has some impact in domestic conditions
within the country. Their business is deeply affected as the number of credit card base in India
during the year ended March 2010 declined to 185.46 lakh from the previous year‘s card base of
246.99 lakh, registering a negative growth rate of 25%.

In case of credit cards, many banks have been closing inactive and unproductive accounts from
their credit card portfolio. Also with the increasing delinquency rate in the country, banks and card
issuers are likely to remain hesitant in issuing new credit cards. Hence there is a negative growth
rate in credit card segment. Besides, it does not make any business case for the banks to maintain
inactive accounts in their systems as it adds avoidable maintenance cost and space in their

The market recently witnessed issuance of lifetime free credit cards come to an end from a leading
private sector bank and others following the same. Banks are shifting their focus off from mass
marketing and catering to premium segments. It is predicted that the year 2010-11 may reinstate
consumer confidence in the usage of credit cards which may result in increase of card base to
about 210 lakh by March 2011.

Chart 1: Growth in Credit Cards Issued (No. of cards in Lakh)

Market Share
This year ICICI Bank, HDFC Bank, SBI and Citibank top the list with a combined market share of
72% in the Indian credit card industry. HDFC Bank comes close to ICICI Bank as the latter reduced
its card base drastically from 72 lakh in 2009 to 45 lakh in 2010. Following the list is SBI, Citibank
and Standard Chartered with market share of 14%, 11%, and 6% respectively.

Table 1: Market Share of Individual Players (Number of Credit Cards in Lakh)

                                         March '09               March '10             March '11
Sr.                                                                                    (Estimated)
No.                                           No. of                  No. of                No. of
                                  Rank                     Rank                Rank
                                              Cards                   Cards                 Cards
 1    ICICI                         1             72.80     1           45.00     1              49.00
 2    HDFC                          2             44.00     2           43.00     1              49.00
 3    SBI                           4             27.00     3           26.62     2              30.00
 4    Citibank                      3             38.00     4           19.50     3              23.00
 5    Standard Chartered            7             13.00     5           11.00     4              13.00
 6    HSBC                          5             15.00     6           10.00     5              12.00
 7    RBS                           6             13.05     7             9.00    6                9.00
 8    Axis Bank                     9              5.43     8             6.00    7                8.50
 9    Barclays Bank                 8              6.00     9             3.60    8                2.40
10    Deutsche Bank                 10             3.50     10            2.25    9                2.25
11    Vijaya Bank                   14             0.83     11            1.48   10                1.58
12    Andhra Bank                   11             1.63     12            1.25   11                1.55
13    Bank of India                 12             1.55     13            1.15   13                1.25
14    Canara Bank                   15             0.80     14            0.90   12                1.50
15    Bank of Maharashtra           16             0.72     15            0.80   15                0.90
16    BOB Cards                     18             0.60     16            0.71   16                0.80
17    Kotak Mahindra Bank           13             1.00     17            0.70   14                1.00
18    Central Bank of India         19             0.50     18            0.69   14                1.00
19    Syndicate Bank                17             0.64     19            0.68   17                0.72
20    Union Bank of India           20             0.30     20            0.38   14                1.00
21    J&K                           21             0.24     21            0.28   18                0.32
22    Corporation Bank              22             0.23     22            0.27   19                0.31
      Others                                       0.17                   0.20                     0.50
      Total                                     246.99                 185.46                   210.58

Chart 2: Comparative Market Share of Individual Players

Sector Wise Market Share of the Banks

Even though, the market share of private banks has increased to 51.21% in 2010, from 49.99% in 2009,
there is a fall in their credit card base. In 2009, the total number of credit cards issued by private banks
in India stood at 123.47 lakh, while in 2010 it fell to 94.98 lakh.

The market share of foreign banks decreased from 35.85% in 2009 with a card base of 88.55 lakh to
29.84% in 2010 with 55.35 lakh cards.

While card base for public sector banks marginally increased to 34.93 lakh in 2010 from 34.80 lakh in
2009, their market share increased from 14.09% in 2009 to 18.84% in 2010.

Chart 3: Analysis in terms of Public Sector, Private and Foreign Banks

Table 2: Analysis in terms of Public Sector, Private and Foreign Banks
                                                     (No. of Cards in Lakh)

                                                                      March '11
                                March '09         March '10
                               No. of cards      No. of cards        No. of cards

       Public Sector Banks
       SBI                              27.00              26.62           30.00
       Vijaya Bank                       0.83               1.48            1.58
       Andhra Bank                       1.63               1.25            1.55
       Bank of India                     1.55               1.15            1.25
       Canara Bank                       0.80               0.90            1.50
       Bank of Maharashtra               0.72               0.80            0.90
       BOB Cards                         0.60               0.71            0.80
       Central Bank of India             0.50               0.69            1.00
       Syndicate Bank                    0.64               0.68            0.72
       Union Bank of India               0.30               0.38            1.00
       Corporation Bank                  0.23               0.27            0.31
       Total                            34.80              34.93           40.61
       Private Sector Banks
       ICICI                           72.80               45.00           49.00
       HDFC                            44.00               43.00           49.00
       Axis Bank                        5.43                6.00            8.50
       Kotak Mahindra Bank              1.00                0.70            1.00
       J&K                              0.24                0.28            0.32
       Total                          123.47               94.98          107.82
       Foreign Banks
       Citibank                         38.00              19.50           23.00
       Standard Chartered               13.00              11.00           13.00
       HSBC                             15.00              10.00           12.00
       RBS                              13.05                 9.00          9.00
       Barclays Bank                     6.00                 3.60          2.40
       Deutsche Bank                     3.50                 2.25          2.25
       Total                            88.55              55.35           61.65
       Others                           0.17                0.20            0.50
       Total                            0.17                0.20            0.50
       Grand Total                    246.99              185.46          210.58

Credit Card Spends
Along with the fall in credit card base, the credit card spends also declined, unlike last year.
Despite Indian economy registering a rise in GDP, consumers seem to have been cautious in using
a credit card for making purchases.

The banks this year have been de-risking their portfolios and have removed several inactive cards
from the market. Fearing the rise in NPAs, banks also reduced the credit limit even for the
customers who have never been on their defaulters‘ list and resultantly lowering the credit card

The credit card spends at merchant POS terminals decreased by 3%; from ` 65,356 Crore in 2009
to ` 63,327 Crore in 2010. In the previous year, despite the fall in credit card base, the credit card
spends had shown a positive growth of 13%.

Chart 4: Growth in Value of Credit Card Transactions (Value ` in Crore)

Table 3: Industry Credit Card Spends at the POS Terminals (Amount ` in Crore)

                                      March '09                March '10                  March '11
Sr.                                                                                       (Estimated)
                               Rank       Spends        Rank        Spends         Rank        Spends
 1    ICICI                       1        20,600.00      1           16,600.00      1          17,100.00
 2    HDFC                        2        11,200.00      2           15,750.00      1          17,100.00
 3    SBI                         4         7,182.76      3            9,200.00      2          10,500.00
 4    Citibank                    3        10,055.15      4            6,690.00      3           8,000.00
 5    Standard Chartered          7         3,439.92      5            3,600.00      4           4,550.00
 6    HSBC                        5         3,969.14      6            3,400.00      5           4,200.00
 7    RBS                         6         3,573.06      7            2,980.00      6           3,000.00
 8    Axis Bank                   8         1,371.00      8            1,400.00      7           1,600.00
 9    Deutsche Bank               9           926.13      9              700.00      8             780.00
10    Barclay's Bank             10           600.00      10             500.00      9             650.00
11    Bank of India              13           327.74      11             341.75      11            400.00
12    Vijaya Bank                11           474.24      12             320.48      12            390.00
13    Andhra Bank                12           344.51      13             292.26      13            350.00
14    Kotak Mahindra Bank        14           264.61      14             250.00      14            300.00
15    Bank of Maharashtra        16           190.52      14             250.00      16            290.00
16    BOB Cards                  17           158.77      15             240.00      18            250.00
17    Canara Bank                15           225.67      16             200.96      10            450.00
18    Central Bank of India      18           132.30      17             166.31      17            260.00
19    Syndicate Bank             19             96.73     18             113.83      19            130.00
20    Corporation Bank           20             77.12     19               98.11     20            100.00
21    Union Bank of India        21             68.44     20               84.25     15            300.00
22    J&K                        22             28.00     21               80.44     21             90.00
      Others                                    50.00                      68.91                   150.00
      Total                                65,355.80                  63,327.30                 70,940.00

ICICI Bank, despite reporting a fall in its credit card base, still tops the list in credit card spends at
the POS terminals, followed by HDFC Bank.


Average Annual Credit Card Spends
Even though, the total credit card base and credit spends have declined, the average annual credit
card spends per card has increased significantly to ` 34,569 in 2010 from ` 26,461 in 2009,
reporting a growth rate of 31%, being 5% higher than that of 2009 (26%).

Chart 5: Growth in Annual Average Credit Card Spends per Card (in `)

Segment Performance
The debit card market has been seeing a remarkable growth over the years in Indian payment card
industry. The number of debit cards issued by banks increased from 1,374.31 lakh in 2009 to
1,815.37 lakh in the year 2010 registering a growth of 32%. In the year 2010-11 the debit cards
are expected to grow further at the same rate and reach a card base of over 2,400 lakh cards.

With most of the banks, particularly PSU banks, having brought all or most of their branches into
Core Banking, issuance of debit cards goes almost with every Savings Bank account. It does not
add any credit risk and saves transaction costs to a great extent when compared to brick and
mortar banking transaction. These are few of the major reasons for the remarkable growth in debit
cards. When compared with the customer base of banks in savings accounts the present debit
card base is still very small and there is great potential for further growth. However, the great
challenge is moving the customer from ATM to POS transactions.

It has also been observed that debit card is also emerging as a preferred transaction tool for e-
commerce payments. Meanwhile banks have also been attracting consumers to choose debit card
as a mode of payment by introducing various schemes like cash back offer on purchases at certain
places and discounts at retail outlets.

Chart 6: Growth in Debit Cards Issued (No. of Cards in Lakh)

Market Share
In 2010, the top three performers in the debit card market in India remain the same. State Bank of
India again emerged as the leader with a card base of 554 lakh, depicting a growth of 31% from
2009. ICICI Bank is in the second position with 160 lakh debit cards and followed by Axis Bank with
147 lakh cards in the market.

Table 4: Debit Card Market Share of Individual Players (No. of Cards in Lakh)

                                              March '09            March '10         March '11
 Sr.                                                                                 (Estimated)
 No.                                                   No. of            No. of           No. of
                                          Rank                   Rank              Rank
                                                       Cards             Cards            Cards
  1      State Bank of India                 1          406.00    1       554.00     1      800.00
  2      ICICI Bank                          2          140.00    2       160.00     2      183.00
  3      AXIS Bank                           3          117.00    3       147.00     3      166.00
  4      HDFC Bank                           4           90.00    4       122.00     4      155.00
  5      Punjab National Bank                5           67.00    5       100.00     5      150.00
  6      Canara Bank                         6           57.50    6        49.96    10       55.00
  7      Syndicate Bank                     10           30.16    7        48.63     9       60.00
  8      Union Bank of India                11           29.00    8        47.66     6       95.00
  9      Bank of India                       9           32.00    9        46.00     7       65.00
  10     Bank of Baroda                      8           35.00    10       45.95     8       64.00
  11     Andhra Bank                         7           40.78    11       45.00    11       50.00
  12     Corporation Bank                    9           32.00    12       36.00    12       40.00
  13     IDBI                               12           24.00    13       29.00    13       35.00
  14     OBC                                13           13.72    14       18.43    14       24.00
  15     Karur Vysya Bank Ltd.              14           13.12    15       17.00    15       22.00
  16     SCB                                15           13.00    16       16.50    17       19.00
  17     Bank of Maharashtra                16            8.16    17       12.66    18       17.00
  18     Vijaya Bank                        20            7.06    18       11.35    16       20.00
  19     Central Bank of India              25            4.21    19       10.22    20       15.00
  20     South Indian Bank                  17            8.00    20       10.00    19       16.00
  21     Dena Bank                          19            7.16    20       10.00    22       12.00
  22     Kotak Mahindra Bank                18            7.23    21        9.50    23       11.00
  23     UCO Bank                           23            5.32    22        8.61    21       13.00
  24     J&K Bank                           22            5.80    23        7.00    24        9.00
  25     RBS                                21            6.60    23        7.00    26        7.00
  26     HSBC                               24            5.00    24        6.50    25        8.00
  27     Citi Bank                          24            5.00    25        6.50    26        7.00
  28     Indusind Bank                      26            2.70    26        4.41    27        5.74
  29     Yes Bank                           27            0.95    27        3.00    28        4.00
  30     Barclays Bank                      28            0.65    28        0.70    29        0.75
         Others                                         160.19            224.79            305.85
         Total                                        1,374.31          1,815.37          2,434.34

SBI emerges as the leader in debit card issuance enjoying a market share of 30%,
followed by ICICI Bank with a market share of 9% and Axis Bank with 8%.

Chart 7: Comparative Market Share of Individual Players

Debit Card Spends
The debit card spends at merchant POS terminals increased significantly by 42% to ` 26,418
Crore during the year 2010 from ` 18,547 Crore recorded in the previous financial year. There is a
considerable rise in spends through debit cards. This surge in debit card usage can be attributed to
the economic slowdown and the cautious attitude of individuals towards spending money and also
large number of debit cards issued by all the banks to their account holders. Consumer prefers to
spend more from their own savings rather than borrowing from any channels. Moreover, it has
been noted according to a market research on Indian Payment Industry that credit cards is a
favoured form of payment only in the top 10 cities in India, while debit card transactions are likely to
prevail elsewhere.

Chart 8: Growth in Value of Debit Card Transactions (Value ` in Crore)

                                               (Source: RBI Bulletin)

Average Annual Debit Card Spends
In the financial year 2009-10, the average annual debit card spends per card at merchant POS
terminals increased by 8% to ` 1,456 from ` 1,350 in the year 2008-09. However this growth of 8%
seems to be low when compared to 10% growth rate in the year 2009 and 12% growth rate in the
year 2008. Also the annual average spend per card on debit card is much lower than that of credit

While the average credit card spends per card stood at ` 34,569 in 2010, the average debit card
spends per card is merely ` 1,456. With vast difference in the two, and keeping the number of
credit cards being considerably less than debit cards in the market, one can safely conclude that
debit cards are not the preferred mode of payment by Indian consumers at the POS terminals. The
greater challenge lies in converting cash transactions at ATMs with debit cards into POS
transactions at the merchant locations

Chart 9: Growth in Annual Average Debit Card Spends per Card (in `)

Segment Performance
Banks are of the belief that ATMs are integral part of their branding and therefore most of them are
trying to increase their ATM base significantly. ATMs are becoming more interactive, and might
turn into mini branches with more facilities are being offered at the ATM location.

In March 2010, as per NPCI, the number of ATMs had reached 56,711. However, this count shows
merely the banks which are linked with NPCI platform of National Financial Switch. The total
number of ATMs in the country as on March 2010 is over 60,000, reporting a growth of 39% from
the year 2009. In the next financial year 2010-11, ATMs are expected to increase by 30% reaching
a base of over 78,000. However, the study is limited to the ATMs of commercial banks and not
covering the ATMS of Co-op. Banks.

Chart 10: Growth in No. of ATM Outlets

Market Share

SBI tops the list again with the highest number of ATM in the country with 16,294 ATMs. It
constitutes to 27% of the market share. ICICI follows the chart with 5,219 ATMs and enjoys a
market share of 9%. Next is SBI Associate Banks with 5,191 ATMs consisting 8% of the market
share. Axis Bank comes in 4th position with 4,293 ATMs and close to it is HDFC Bank with 4,232
ATMs, both with a market share of 7% each.

Chart 11: Market Share of Individual Players

Table 5: Market Share of Individual Players

                                      March '09          March '10        March '11
 Sr.                                                                      (Estimated)
 No.                                       No. of             No. of             No. of
                               Rank                    Rank             Rank
                                           ATMs               ATMs               ATMs
 1     State Bank of India       1            8,548     1      16,294    1        24,000
 2     ICICI Bank                2            4,713     2       5,219    3         5,750
 3     SBI Associates            5            2,791     3       5,191    2         7,500
 4     Axis Bank                 3            3,595     4       4,293    4         5,200
 5     HDFC Bank                 4            3,295     5       4,232    5         5,000
 6     PNB                       6            2,150     6       3,544    6         4,000
 7     Union Bank of India       8            1,790     7       2,326    7         3,750
 8     Canara Bank               7            2,019     8       2,016    8         2,100
 9     Bank of Baroda            9            1,179     9       1,362    9         1,520
 10    IDBI Bank                 12             900     10      1,201    10        1,500
 11    Syndicate Bank            10           1,090     11      1,187    11        1,300
 12    Corporation Bank          11           1,032     12      1,145    12        1,270
 13    Indian Bank               15             755     13      1,007    11        1,300
 14    OBC                       13             845     14      1,000    13        1,200
 15    Andhra Bank               14             778     15        859    15          950
 16    Bank of India             18             500     16        820    10        1,500
 17    IOB                       17             576     17        771    14        1,000
 18    Federal Bank              16             617     18        732    16          850
 19    Indusind Bank             22             364     19        497    17          600
 20    Kotak Mahindra Bank       21             387     20        492    19          520
 21    UCO Bank                  19             414     21        478    20          500
 22    Citibank                  23             359     22        450    18          560
 23    Vijaya Bank               22             364     23        446    21          480
 24    Dena Bank                 21             387     24        425    22          460
 25    CBI                       20             400     25        402    14        1,000
 26    Karur Vyasya Bank         26             324     26        376    23          430
 27    South Indian Bank         27             280     27        373    21          480
 28    ING Vyasya Bank           24             351     28        357    24          397
 29    Bank of Maharashtra       25             345     29        345    25          350
 30    J&K Bank                  28             250     30        292    26          320
 31    United Bank of India      29             226     31        283    27          310
 32    SCB                       32             188     32        242    28          305
 33    Karnataka Bank            34             171     33        217    29          300
 34    Allahabad Bank            30             211     34        211    31          215
 35    Yes Bank                  31             190     35        206    30          220
 36    HSBC                      33             178     36        185    32          190
 37    DCB                       35             112     37        110    33          114
 38    Deutsche Bank              -              NA     38         23    35           30
 39    Barclays Bank             36               11    39         17    34           47
       Others                                   966             1,000              1,100
       Total                                43,651             60,626             78,618

As per the data of World Bank and CGAP the number of ATM units per million people in India is
35. It is just half of China where the number is 70 units per million people. The comparative figures
on density of ATMs in some of the Asia Pacific and other countries are as follows:

Table 6: Country wise ATM Density

                                                      ATM units per million
                       Taiwan                                           1,336
                       Thailand                                           655
                       Singapore                                          506
                       Malaysia                                           432
                       Australia                                          159
                       Indonesia                                          134
                       Philippines                                        134
                       Sri Lanka                                          104
                       China                                               70
                       India                                               35
                       Pakistan                                            34
                       Nepal                                               11

Segment Performance
The Merchant Point of Sale (POS) Terminals in India have increased by 12% in 2009-10 as against
9% recorded last year. The number of POS terminals in the country at the end of March 2010 was
over 4,76,000. The slow growth in the year 2009-10 is attributed to the strategic decision taken by
some of the major banks in weeding out inactive and unproductive merchant terminals from the

Table 7: Market Share of Individual Players

                                        March '09               March '10                 March '11
 No.                                         No. of                  No. of                     No. of
                                  Rank                    Rank                      Rank
                                           Terminals               Terminals                  Terminals
   1     AXIS Bank                  2         114,500      1          160,900         1          200,000
   2     ICICI Bank                 1         180,000      2          150,000         2          170,000
   3     HDFC Bank                  3          70,000      3           90,000         3          110,000
   4     HSBC                       4          15,000      4           16,000         5           17,000
   5     Citibank                   5          12,500      5           13,500         6           14,500
   6     IDBI                       7           6,754      6           10,900         4           20,000
   7     BOB Cards                  6          12,311      7           10,000         8            7,000
   8     Corporation Bank           -              NA      8            5,000         7           10,000
   9     Andhra Bank                8           3,783      9            4,000        10            4,500
  10     J&K Bank                  11           1,958      10           2,600        12            2,900
  11     SCB                        9           2,083      11           2,500        13            2,800
  12     DCB                       10           2,269      12           2,100        15            2,000
  13     Bank of India             13           1,640      13           1,800        11            3,000
  14     Vijaya Bank               12           1,736      14           1,700        17            1,450
  15     Union Bank of India        -                 -    15               1,600    9              5,000
  16     Canara Bank               14           1,353      16               1,300    16             1,500
  17     Central Bank of India     15               751    17                800     9              5,000
  18     Yes Bank                   -                 -    17                800     10             4,500
         Indian Overseas
  19                                -                 -    18                500     18             1,000
  20     OBC                        -                 -    19                400     14             2,300
  21     Deutsche Bank             16                79    20                150     20               200
  22     PNB                        -                 -    21                100      8             7,000
  23     Syndicate Bank             -                 -    21                100     19               300
         Total                                426,717                 476,750                    591,950

The year 2010-11 will witness the entry of new banks into Merchant Acquiring business. SBI is
intending to install about 1,50,000 POS terminals. South Indian Bank and Indusind Bank are also
following the league with a target of 1,500 and 5,000 terminals respectively by the end of next year.

Chart 12: Comparative Market Share of Individual Players

Chart 13: Bank Wise Growth of Merchant POS Terminals

Total Spends of Debit & Credit Cards at Merchant POS Terminals
The total spends with credit and debit cards at merchant POS terminals increased during the year
from ` 83,903 Crore in 2008-09 to ` 89,745 Crore in the year 2009-10, reporting a growth of
merely 7% compared to 19% growth registered in the previous year.

Chart 14: Growth in the Value of Debit & Credit Card Transactions at ME POS
          Terminals (` in Crore)

Pre-paid Payment Instruments
Pre-paid payment instruments are payment instruments that facilitate purchase of goods and
services against the value stored on such instruments. The value stored on such instruments
represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card.
The pre-paid instruments can be issued as smart cards, magnetic stripe cards, internet accounts,
internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments which
can be used to access the pre-paid amount.

The pre-paid payment instruments that can be issued in the country are classified under the three
categories viz. (i) Closed system payment instruments (ii) Semi- Closed system payment
instruments and (iii) Open system payment instruments.

   (i) Closed System Payment Instruments: These are payment instruments issued by a
       person for facilitating the purchase of goods and services from him/it. These instruments
       do not permit cash withdrawal or redemption. As these systems do not facilitate payments
       and settlement for third party services, issue and operation of such instruments are not
       classified as payment systems.

   (ii) Semi-Closed System Payment Instruments: These are payment instruments which are
        redeemable at a group of clearly identified merchant locations / establishments which
        contract specifically with the issuer to accept the payment instrument. These instruments
        do not permit cash withdrawal or redemption by the holder.

   (iii) Open System Payment Instruments: These are payment instruments which can be used
         for purchase of goods and services at any card accepting merchant locations (point of sale
         terminals) and also permit cash withdrawal at ATMs.

As per RBI regulations, only banks are permitted to issue all categories of pre-paid payment
instruments. Our study is limited to prepaid cards issued in the banking sector under open system
payment instruments

Emerging Industry
Prepaid Cards market in India is still at a nascent stage. The market for prepaid cards is currently
highly under-penetrated in India. No standard industry figures are available about the size or
growth rate of the prepaid market, but estimates suggest that the industry is growing rapidly and
represents a substantial market opportunity. In 2010, the market is expected to double from ` 45
Bn to ` 90 Bn of spends. We expect that the market to pick up around FY12 through increased
focus of banks on prepaid cards.

Among many players in the market, ICICI Bank has about 20 lakh prepaid cards, Axis Bank has
around 10.82 lakh, State Bank of India has about 8.40 lakh, and IDBI Bank has approximately 5
lakh cards issued in the market as of March 2010.

Some of other players in this market are Corporation Bank, Union Bank of India and Central Bank
of India with about 0.10 lakh, 0.06 lakh and 0.03 lakh prepaid cards respectively.

The banking sector has been on the course of risk aversion, thereby reducing issuance of credit
cards and in order to boost organic growth, banks have diverted to this safer option – ‗open‘
prepaid cards. Bank of India, Andhra Bank, Barclays and HSBC are few other banks, which are
weighing the option of foraying into this sector.

India is said to be an emerging prepaid market with tremendous potential for growth and financial
inclusion. With a population base of about 1.18 billion, the country has only 20% of the adults
access to any payment card system. The rest 80% do not even have access to a savings account.
In the country, 80% of the business transactions take place in cash form and it is strongly believed
by industry experts that prepaid card will replace it soon. Plastic money seemed to have taken
quite a grip in the Indian payment industry and now it is the prepaid cards that will command the

Banks are foraying into prepaid cards which are often issued as travel cards, gift cards, pension
cards, payroll cards, utility bill payment cards etc. Across the world, prepaid cards are also used as
a means to give money to children and teach them money management. It is an easy way
thorough which parents can set control on what money can be spent on. Greater efficiency,
simplicity, and availability of the prepaid debit card have also stimulated its popularity.

Travel Cards
Travel Cards are the potential payment instruments for the Outbound Indian Travelers. These
cards are issued to the Outbound Indian Travelers in different destination currencies. The following
are the drivers for the Outbound Indian Travelers.

       Economic and Industrial growth
       Increase in investments abroad by corporate India
       Increase in consumerism across Indian society
       Growing demand for leisure travel like honeymoons and cruises
       Increased disposable incomes and spending power
       Growth of the DINK (dual income no kids) segment
       Large section of population fluent in English and comfortable with travel abroad
       Entry of newer competitive international airlines and the slashing of air fare rates
       Increased marketing by foreign destinations
       Simplified visa procedures by foreign tourist offices

Table 8: Growth of Travel Cards

                                                                                     March, ‘11
                       Details                        March ‘09     March ‘10        (Estimated)
    Total outbound tourism spends - ` Mn.              4,42,800      4,95,936            5,65,870
    Growth%                                                20%           12%                 14%
    % of Spends by Cards                                   25%           30%                 35%
    Amount of Spends by Cards - ` Mn.                  1,10,700      1,48,781            1,98,055
    Average Card Load per annum - `                      60,000        65,000              70,000
    Number of Travel Cards – Mn                             1.8            2.3                2.8

Corporate usage accounts for over 80% of the volume in travel cards and within the corporate sale
segment, the IT industry accounts for 70% of the sale of travel cards. Travel cards are used
primarily for cash withdrawals overseas. Cash withdrawal accounts for 60% of the overseas
transactions using travel cards and the remaining 40% are POS transactions

Gift Cards, Payroll Cards & Pension Cards
       Currently, we estimate 5 lakh gift cards in India in FY10 while industry sources estimate
       the market potential to be sale of 3 lakh cards per month

       On observing the phenomenon of gift cards in geographies like Canada - in 2003, just over
       a third of retailers in Canada offered gift cards and then there was an explosion of gift cards
       onto the retail scene. According to Statistics Canada, 82 per cent of retailers were in on the
       gift-card game by end 2006. A survey by the U.S. National Retail Federation in 2007
       suggested that 8 out of 10 people would include gift cards among their holiday shopping
       purchases. The main reason being convenience. Similar trend is predicted in growth of gift
       cards in India in near future and the market for gift cards to gain traction in FY12

       There are nearly 2 Mn pensioners in the military sector alone and around 1.9 Mn
       pensioners in the central government sector. There is a huge opportunity for usage of cards
       for withdrawal of pensions which is currently lying untapped.

       India is currently estimated to have a total workforce of 500 Mn, which is expected to grow
       by 20 Mn every year over the next 10 years. India has the potential to account for one-
       fourth of the overall workforce across the world by 2022. Payroll cards are a convenient
       means of salary disbursal amongst blue collar workers instead of cheque / cash. HR
       Consulting & Outsourcing companies are also promoting card based salary disbursal

       Since payroll and pension cards are new in the market, the market for these cards is
       expected to gain traction by FY12.

Segment Performance
India currently has the second largest telecommunication network in the world after China. The
number of mobile subscription has crossed a mark of 600 million in March 2010; however this
growth is mostly skewed towards urban areas. As rural tele-density still remains very low, mobile
phones seem to have gained higher penetration than internet in India and therefore majority of the
population is readily accepting Mobile Commerce (M-commerce). Majority of the Indian population
who neither had a landline phone nor a bank account not only own a mobile phone now but are
well poised to transact on their mobile phones. Mobile penetration is at ten times that of PC
penetration in the country. This high rate of mobile penetration will help in reaching under-banked
and non-banked areas and thereby contribute to the financial inclusion process.

Dr. K. C. Chakrabarty, Deputy Governor of RBI opines that M-commerce is an area which is rapidly
changing the way people conduct their financial transactions. Besides this, it is an area that offers
abundant scope for inclusive growth. It is also an area that presents new challenges to the
regulators across the globe.

M - Commerce can be broadly divided into two categories:

   1. Mobile Banking
   2. Mobile Payments (A sub-set of Mobile Banking, which is offered by Banks)

Mobile Banking comprises of the following :

       1.   Provisioning and availability of banking and financial services
       2.   Conducting bank and stock market transactions
       3.   Mobile remittances, micro-finance and micro-payments
       4.   Placing orders and making payments through SMS
       5.   Issuing instructions to pay monthly utility bills
       6.   Banking alerts, banking requests, salary credit

Mobile banking offers the facility of accessing banking products, which includes
payments/remittances from bank account to bank account – either inter-bank or intra-bank.

Mobile Payments covers the following four types of payments:

1. Business to Consumer (B2C) Mobile Payments:

       The defining feature of B2C Mobile Payments are integration onto the mobile handset
       interface, and payment for direct acquisition of goods and services. B2C Mobile Payments
       can be further divided into the following four categories:

       a) Purchase of Goods & Services from Physical Merchants
       b) Physical Bill Payments
       c) Purchase of Goods and Service from Remote Merchants (Non Internet Mobile
       d) Remote Bill Payments (Non Internet Mobile Payments)

2. Business to Business (B2B) Mobile Payments:

      a) Mobile transactions to supplement or extend existing transaction practices – largely
         being driven by telecommunications fixed – mobile convergence
      b) Facilitate business process
      c) Encompasses specific industry solutions ( eg. Logistics processes utilizing technologies
         to track and pay for shipments & inventory), third party platform aggregation and billing
         solution, including payment gateways who do not themselves own the content, but
         provide platforms for accessing content

3. Consumer to Consumer (C2C) Mobile Payments:

      a) Transaction directly between end-customers on a platform established specifically for
         the exchange e.g. eBay

4. Peer to Peer (P2P) Mobile Payments:

      a) Private transactions between two individuals (usually SMS – based)
      b) They involve transactions like M-Banking transfer of funds

Global M-commerce market
   As per the estimates of Gartner, there were 74.4 Mn people using mobile devices to purchase
   goods and services worldwide by the end of 2009, and predicted that number would be more
   than double by the end of 2012 globally. ABI Research expects 407 Mn people worldwide to
   use mobile banking by 2015.

          Worldwide, Mobile Commerce is expected to grow to US$ 119 Bn by 2015.
          In Japan, which has one of the most vibrant mobile markets, mobile commerce
          exceeded $10 Bn in 2009
          Worldwide, the number of mobile-banking users grew from 24.4 Mn in 2008 to 52.1 Mn
          in 2009. Half of those users were in the Asia-Pacific region.

          The biggest share of mobile payment users is expected to be in the Asia/Pacific region
          and Japan through 2012, followed by Eastern Europe, the Middle East and Africa and
          Latin America. Behind those regions will be the U.S. and Western Europe. Mobile
          commerce tripled in the United States in 2009, but still only constituted a US$1.2 Bn
          market. There is huge potential for growth in the U.S. In Europe, the adoption has been
          slow with mobile payments barely moving beyond the trial stage.

          Japan and Korea, global market leaders in adoption of digital technologies, have also
          shown high adoption of mobile payments.

          Hong Kong, Singapore and Taipei have a high penetration of mobiles but have shown
          little adoption of mobile payments , except in the use of contactless cards for
          transportation and some limited retail usage.

           The large but less developed markets of China, India, Indonesia and Philippines are
           demonstrating a quick adoption across a large range of M-payment areas such as
           remittance, bill payment to M-Ticketing . Though the usage in India is currently limited
           largely to Mobile Recharge (M-Top Up), Thailand, Malaysia and Vietnam have a strong
           adoption of mobile payments for top-up and gaming but less extensive adoption in
           traditional areas like M-Banking. More than 90% growth in M-commerce is expected in
           the APAC region in the next few years

M-commerce in India
In India, Mobile Commerce is still a nascent market. There are currently just over 5 Mn M-
commerce users in India. RBI has been taking several initiatives to fillip the growth of M-Commerce
such as raising the daily transaction limit to ` 50,000. More than half of Asia's mobile banking
customers in 2009 were in India. Celent expects the penetration of India's active mobile banking
user base to reach 25 Mn by 2012 from 2.5 Mn in 2009.

With barely 40% of its population engaged in formal banking, India has the second highest number
(after China) of financially excluded households in the world – about 135 Mn. India has close to
6,00,000 villages. The high penetration of mobile phones in rural areas makes mobile banking
one of the less expensive and convenient modes of financial inclusion.

Out of 32 banks that have been given approval to provide mobile banking facility in India, only 21
banks have started providing the services. The Indian customer has been slow in adoption of M-
Commerce due to low awareness, low spread of M-Commerce across merchants and security
concerns on usage. Banks and Telcos are exploring ways to work together to get RBI‘s approval
and provide mobile based banking convenience and tap the large unbanked segment. It is
expected that the market for mobile commerce in India to gain traction in the next two -three years.

Segment Performance
E-commerce has been trying to replace the traditional method of retailing. Some have accepted it
easily but majority have not, probably because of lack of supporting and secured infrastructure or
are just not technological savvy. No standard industry figures are available about the size or growth
rate of the E-Commerce market, but estimates suggest that the industry is growing rapidly and
represents a substantial market opportunity. The Internet commerce industry is dominated by the
Online Travel Industry which includes Railway, Airlines, Hotels, Travel Aggregators and Tour

As of December 2009, E-commerce market in India was worth around ` 9,500 crore, out of which
pure play online shopping market was worth ` 1,300 crore. While online shopping at global level is
growing at around 8%-10%, in India, it is growing at the rate of 30%. (Source: Economic Times)

By March 2009 the value of E-commercs reached ` 12,000 Crore and by the end of 2010 it
crossed ` 15,600 Crore registering a growth rate of 30%.

Chart 15: Growth in Value of E-Commerce (` in Crore)

The year 2009 witnessed 74% of the E-commerce industry being driven by Online travel industry.
Etailing comprised of 12%, Online classifieds 10%, Online Subscription 1% and Digital downloads
on mobile 3% of the total E-commerce industry.

Chart 16: Percentage contribution by categories in E-commerce

It is said that while brick and mortar banking, credit cards, and paper transactions will continue to
be the industry‘s main revenue drivers, mobile payments, e-commerce and debit cards will provide
the fastest growth opportunities.

In India, the growth in middle class with rise in average income is indulging themselves in obtaining
services which takes less time, therefore transacting online and on mobile.

Global E-Commerce Market
Chart 16: Growth in retail e-commerce worldwide ($ in Bn.)

                                                                                    (Compiled by P. Ravindra)

1. Drivers for the payment systems industry
   As per the ‗Vision Document‘ of RBI on Payment Systems in India for the period 2009-12,
   released on February 16, 2010, the scope has been enhanced to ensure that all the payment
   and settlement systems operating in the country are safe, secure, sound, efficient, accessible
   and authorised. Smooth functioning of payment systems becomes vital in the light of inter-
   linkages they have with other financial systems. The Reserve Bank of India shall continue its
   initiatives for ensuring smooth operations and proper conduct of the payment systems.

   The National Payments Corporation of India (NPCI), set up by the Reserve Bank of India as an
   umbrella organisation for operating and managing retail payment systems, has the envisioned
   role to look at future innovations in the retail payment space in the country.

   According to a report published by McKinsey on India‘s emerging payments market in
   September 2009, India‘s payment industry earned revenues of nearly $ 14 billion. Payment
   flows were 7.8 times the GDP. A noticeable trend according to the report was that majority of
   the payment flows occur to and within the business sector. India‘s payments industry ranks fifth
   among Asian countries by revenue. It is expected that by 2015, most of the revenue will be
   earned through mobile payments growing with a rate of 51%, followed by debit and prepaid
   cards growing with a rate of 42.9% annually.

   According to the report, three trends appear to be shaping India‘s payments industry: growth in
   electronification, increasing regulatory oversight and business models.

   Technology plays a great part in developing a payment infrastructure. More important is the
   rate of adaptability by players in the card payment industry who seem to be accepting it readily.
   It is believed that with the rise in affluent middle class and a growing organized retail industry, it
   is likely to increase consumer electronic transactions from about 3% to 15% of total transaction
   value by 2015.

   New business models which introduce intermediaries in the payments value chain to make it
   more effective and efficient is on the rise. Trends like outsourcing POS network, outsourcing
   set up of ATMs is on the rise. Several non-banking participants emerge as they take up a role
   in the consumer card payments. Bill pay aggregators, technology providers, and transaction
   processing firms are few examples. Several non-banking firms form alliance with banking firms
   to participate in consumer card products as there are certain regulatory restrictions for other
   than financial institutions to participate in payment systems.

2. Merchant space in India
   Over the years, merchants in India have become a very important part of the value chain in the
   payment card industry. With fortunes locked up at the bottom of the pyramid, every business
   has been looking towards the semi-urban and rural market of India. Several SMEs in India still
   deal with cash transactions, especially very much in semi-urban and rural markets. Banks in
   turn either pressurise or insist these SMEs who generally have a current account, or have
   taken up loan from the bank to install POS terminals at their outlet/shop. Banks in turn expand
   their reach to greater geographical area, whereas merchants get an easy way out of handling
   large amount of cash.

   Despite the infrastructural hurdles in deploying POS terminals across India, the business has
   taken up a huge leap with not only banks eager to increase their terminals but also merchants
   noticing the trend shifting towards plastic money. With RBI now allowing cash withdrawal at
   POS terminals, several SMEs have an option of becoming a player in the payment card
   industry and earn extra to their income. Further, with very large banks like SBI and Punjab
   National Bank entering into the merchant acquiring space, there will be exponential growth in
   the next 3 years in the number of POS outlets in the market.

3. Trend of outsourced vs. in-sourced market for Payment Card Industry
   The trend of banks moving more towards outsourcing in the payments card industry is
   increasing in the areas of acquiring processing, credit card issuance processing, debit card
   reconciliation and ATM Managed Services. Even banks which had their processing in-house or
   were managing these functions in-house are moving towards outsourcing and focusing more
   upon their mainstream banking business. By doing so, banks will not only save time but will
   also be able to experience cost efficiencies and economies of scale at an early stage. During
   the year ICICI Bank hived off their acquiring business from their mainstream banking by setting
   up a Joint Venture with one of the MNC Service Providers. SBI has also ventured into a Joint
   venture with Multi National Entities to enter into merchant acquiring business. The trend is more
   in this direction for few other banks.

   The driving force for such a trend is that banks are realizing that POS network can be used for
   many activities beside accepting payments or providing cash withdrawals. With innovative
   technologies entering into the market, POS platform will not only provide with hassle free
   transactions but also allow a gamut of value added services like mobile recharge, pre-paid DTH
   vouchers, long distance calling cards, internet broadband vouchers, payment of utility bills and
   money transfers for bill payments by customers to merchants and much more. Every bank is
   well aware of the benefits that it will earn them with such value added services. Not only they
   will be able to earn through all the payments but also improve upon their CASA ratio as the
   merchant will be required to open a current account with the acquiring bank. Presently, about
   80% of the services of POS terminals are outsourced.

   With the growing spread of retail banking, it is expected that banks will increase focus on their
   retail products such as credit cards. Many banks which were earlier not focused on the retail
   products portfolio are expected to now drive focus on the same to attract and retain customers.
   Outsourcing credit card issuance processing will enable these banks to become feature rich,
   operationally efficient and less lead time to go to market when the card base and transactions
   are low. We predict that the percentage of outsourced credit cards issuance services to
   increase from 16% of the total credit cards market in FY10 to 65% in FY14.

   With the increase in usage of debit cards at POS terminals and ATMs, accurate and speedy
   reconciliation of debit card transactions is becoming important for banks. With end-to-end
   automation being offered by service providers and large transaction volumes for debit cards, it
   is predicted that banks may move from in-house reconciliation to outsourcing their
   reconciliation processing. This will enable banks to have access to latest technologies for an
   operationally efficient reconciliation of transactions and reduce risk of errors. The percentage of
   outsourced debit card services may increase from 23% of the total debit cards in the country in
   FY10 to 75% of the total debit cards in FY14.

4. Debit card transactions at POS terminals

   On an average, there were 12 transactions at ATM per debit card per annum in FY08. 70% of
   transactions at ATMs in India are financial transactions. Banks are putting their efforts to make
   their customers to shift their debit card transactions from ATM to POS for cost effective banking
   transactions. It is evident from enhanced focus of banks on debit cards with special promotions
   on debit card usage at POS terminals, increasing POS infrastructure availability and cash
   withdrawal facility at POS locations with debit cards. As per market estimate, there would be a
   six fold increase in number of debit card transactions at POS and the annual average debit
   card usage at POS will rise from 1 transaction per debit card at POS in FY10 to 6 transactions
   in FY14.

   The debit card transaction value at POS terminals stood at ` 26,418 in the year 2009-10 and
   has been growing at a CAGR of 33% per annum. The average annual per card usage is also
   growing at a CAGR of 5% per annum.

5. Trends in ATM banking channel in India
   ATMs have already turned out to be more than a quick stop to withdraw cash. Presently, ATMs
   also offer facilities of balance enquiry, mini account statements and PIN change. Some banks
   are offering services of transfer of funds, recharge mobiles, payment of insurance premium,
   utility bill payments etc. through ATMs and there by acting as mini branches for customer

   A new concept called Lobby banking or lounge banking is being promoted by few banks. Banks
   believe that customers should interact for more banking services when a customer visits the
   ATM premises to withdraw cash. To enhance their services, relationship managers are being
   stationed at ATM premises to help customers with their investment portfolios and other banking

   ATMs are going to be more intelligent in days to come. It remembers the most often entered
   amount of withdrawal by individual cardholder and thus making it possible to have a faster cash
   withdrawal. And soon, these machines are going to be more interactive, with voice, data and
   video capabilities. The machines will be able to suggest solutions and have an interactive
   dialogue with users.

   RBI has permitted banks to install off site ATMs at centers/places identified by them, without
   having the need to take prior permission. RBI has also allowed well off performing urban co-
   operative banks to open off site ATMs provided they fulfill some basic criteria. Other banks, in
   order to increase their ATM network, have begun to outsource the setting up of ATMs and its
   management. It will help reduce their capital expenditure and reach wider population area.
   More banks are evaluating the same approach to increase their ATM network. At the same
   time, most of the banks are associating themselves up with NPCI‘s NFS to increase their reach
   across the nation. It is estimated that the number of ATMs are set to cross one lakh by 2013.

   Another technology which will revolutionize the rural ATM market is solar powered ATMs. SBI
   has planned to deploy over 300 solar-powered ATMs - developed in collaboration with IIT
   Madras – to be first of its kind to be deployed in the country. These machines not only enable
   cash saving of `1,20,000 a year since they use less electricity as they do not require air
   conditioning, unlike regular ATMs, but they also emit less CO2 by at least 18,500 kg per year.

6. Challenges in Pre-paid payment instruments
  Despite all the advantages and bright future in store for prepaid card industry, there are several
  hurdles that need to be overcome. The most important challenge is legal and regulatory
  requirements that need to be met. Moreover, instating public‘s belief in pre-paid cards system
  will be a challenge. Therefore, education, evangelizing, and marketing remain the top three
  priorities for prepaid marketers.

  Another challenge is the long value chain that the industry follows. Retailers in India are not
  allowed to issue prepaid cards other than Closed System pre-paid instruments. It is a pre-
  requisite to form a partnership with a bank. Then there is also a need to form an alliance with
  network provider (Visa or MasterCard) and a third party infrastructure service provider. Hence,
  it often becomes a difficult and painful challenge to design a prepaid business model as each
  member involved needs to work coherently.

  Alongside the buzz of globalization, it has been realized by many MNCs that certain level of
  localization is essential to cater to specific needs in each country. India being so multi-cultural,
  a common form of international product wouldn‘t work and thus it needs to be very region-

  Although, there are certain challenges associated with prepaid cards, it is an upcoming product
  in the payment card industry. Along with being a non-traditional market for the banks,
  innovations in providing prepaid solutions to identify and serve unmet financial needs bring lots
  of potential.

7. M-commerce and its impact
  According to a World Bank study, four risk factors have been identified in the Integrity of Mobile
  Financial Services viz. anonymity, elusiveness, rapidity and poor oversight. Anonymity is the
  risk of not knowing a customer‘s actual identity. Elusiveness is the ability to disguise mobile
  transaction totals, origins and destinations. Rapidity is the speed with which illicit transactions
  can occur. Poor oversight identity refers to the level of regulation of service providers.

  Few are of the opinion that M-commerce will not be successful or rather will not be able to grow
  at a tremendous rate because of majority of unbanked population and poor credit card
  penetration in India. However, countries like Cambodia and Vietnam which are much poorer
  economies than India and have much lesser credit card poluation and yet prove to be an
  example where M-commerce have seen a tremendous growth.

  After RBI issued guidelines for setting up M-commerce infrastructure, things are looking bright
  for mobile users. No longer does the facility of M-commerce remains with the people with high-
  end GPRS enabled phones and to those only who possess credit cards. The Government‘s
  step to bring financial inclusion in the country can be achieved with the help of M-commerce.
  The problem of reaching customers/consumers through E-commerce (internet) was the high
  infrastructural costs associated with it. Communication by mobile phones – to a large extent-
  overcome the restraints imposed by lack of infrastructure developments like, roads, postal
  services, and may lead to efficient markets and contribute to the rapid economic growth.

  As of now, India has reached a mark of 646 million telephone connection, out of which 610
  million are mobile connections. Globally, in terms of mobile subscriptions, India is the world‘s
  2nd largest wireless market after China. The overall mobile penetration is expected to reach
  78.3% in 2013 from about 30% in 2008. By 2013, the penetration is expected to reach 142.5%,
  79% and 15% in the urban (above poverty line), rural (above poverty line) and urban (below
  poverty line), respectively. The number of 3G handset users in India is above 20 Mn. The
  number of 3G handsets is expected to reach 395 Mn by 2013, an increase of about 82%
  (CAGR) from 2008.

  The obstacle in the reach of E-commerce will be taken care by M-commerce due to wide
  spread of usage of mobile phones. Till date, we have seen mobile phones being used for
  banking, buying movie tickets, book flights or train tickets, pay mobile bills and insurance
  premiums. The next trend in the M-commerce world will be shopping fast food, music, groceries
  and health care through the same platform.

  The advent of price war among the telecom service providers and mobile companies launching
  handsets at more affordable rates can be said to be among the drivers for the rise in mobile
  use. These Mobile Network Operators (MNOs) are focusing more on providing VAS (Value
  Added Services) to attract more customers. Platform like WAP, Mobile Office by various MNOs
  are being offered to customers at affordable rates. As a result, customers make use of it to
  book movie tickets, money transfer and recharge their phones. However, those people who do
  not have high end phones and credit cards are left out. Several initiatives are being taken to
  include those people. With 3G on the horizon and setting up of mobile wallets under the
  guidelines proposed by RBI, mobile companies can use this platform to their advantage.
  Interactive Voice Response (IVR) is another platform through which one can transact via M-
  commerce and one need not have a GPRS enabled phone. Yet again, this technology also has
  its own limitations. It can be used only for enquiry based services. IVR is also more expensive
  as it requires making a voice call which is anytime more expensive than sending SMS or
  transferring data.

  The success of M-commerce requires inclusive growth. The trend of using M-commerce for
  making payments, require intervention from banks as well as telecom service providers.
  Financial inclusion, ―at present is confined to ensuring a bare minimum access to a savings
  bank account‖ according to Deputy Governor of Reserve Bank of India. M-commerce is one
  way among many through which India can achieve the stage of financial inclusion.

8. Cash withdrawals at POS terminals

  After the RBI‘s initiative to provide a ‗thrust to financial inclusion‘ and ‗enhance customer
  convenience‘, the facility to allow cash withdrawal with debit cards at POS terminals at
  merchant establishments has been a trend setter in the industry.

  This facility is available only against debit cards issued in India. The maximum amount that can
  be withdrawn at POS terminals is fixed at Rs.1000/- per day. This facility may be made
  available at any merchant establishment designated by the bank after a process of due
  diligence. The facility is available irrespective of whether the card holder makes a purchase or

  Apart from providing financial inclusion to the citizens of India, this step is also a cheaper
  alternative to enable cash withdrawals. A POS terminal at a grocery store or a jeweller shop is
  a cheaper alternative for banks as opposed to set up an ATM in up-country locations which

   may not always be a viable option. Once this facility is enabled, customers in remote region of
   the country will not be required to travel distances to withdraw cash. Therefore, setting up POS
   terminals where ATMs cannot be set up will bring huge financial savings to the banks.

   With over 180 Mn debit cards in circulation, banks are hopeful that establishing POS terminals
   will take away pressure from setting up more ATMs and will also lead to less cash handling as
   customers will use the debit cards more for making payment. It will also facilitate to drive the
   debit card customers towards POS transactions.

9. Loyalty programs in Indian retail industry
   Indian retail industry is the fifth largest destination globally and is ranked as the most attractive
   emerging market for investment in the retail sector. While the unorganized sector in Indian retail
   industry comprises majority of the industry, the organized sector is upcoming and rising quick.
   Lifestyles of Indian consumers have changed. Living in nuclear family, consumers do not mind
   paying extra to save time. They are becoming more experimental and are aware of fashion and
   brands. They also have access to more disposable income and are thus willing to indulge
   themselves in luxury. As a result, retail industry among many is thriving. According to a study
   conducted by the Indian Council for Research on International Economic Relations (ICRIER),
   the retail sector is expected to contribute to 22% of India‘s GDP by 2010. With plethora of
   choices for consumers at large, a concept of loyalty program is on the rise.

   Loyalty programs, what Wikipedia defines are ‗structured marketing efforts that reward, and
   therefore encourage, loyal buying behavior — behavior which is potentially of benefit to the
   firm.‘ Various names are given to such cards in the retail industry: rewards card, points card,
   advantage card or club card. However, the ultimate purpose of such cards remains the same.
   They are a plastic/paper card through which a customer is identified as a member in a loyalty
   program. Loyalty program is a system where a customer (card holder) is given additional
   discount on purchase made or is allotted some points that can be used in future purchases or
   can be redeemed in the form of gifts.

   Two types of loyalty programs (LPs) are prevalent in India: brand specific and multiple brands.
   When a retailer offers a loyalty card to be used exclusively for its own retail outlet is known as
   exclusive card which is brand specific. On the other hand, loyalty program which is associated
   with multiple partners that provides a single platform to thousands of merchants to interact with
   millions of customers and in turn customers are benefitted no matter where they shop or spend
   are known as coalition loyalty programs. Loyalty programs are designed according to specific
   needs of the company and upon using these cards, customer‘s basic information like name,
   address, and item shopped is recorded. This data is then analyzed which is used by companies
   to develop a customer profile and thus redesign promotional activities.

   In emerging economy of India, loyalty programs are still in a nascent stage but have a huge
   potential. The industry has witnessed the launch of real time loyalty program on a pilot basis by
   few players and we expect this to grow substantially in future which will benefit card issuance
   as well as acquiring businesses.

10. Vision of regulatory authorities on payment systems

   Reserve Bank of India‘s vision on payment systems has been outlined in the ‗vision document‘
   on Payment Systems in India for the period 2009-12. The objectives of RBI have the following
   six distinct and succinct components that would be integrated to form the universe of scope and
   premise of action.

          Safety – Keeping the risks in various payment system products minimum and
          manageable if they are necessary and unavoidable.
          Security – Giving confidence to stakeholders that the payment systems can be trusted
          and are reasonably protected from threats and vulnerabilities.
          Soundness – Demonstrating the capability and ensuring the payment systems function
          in a non-disruptive manner.
          Efficiency – Providing measures to assure that the payment systems are cost-effective,
          reliable and promote financial and economic stability.
          Accessibility – To ensure reach of various payment systems at reasonable cost to
          various segments of the populace.
          Authorisation – According entities permission to operate payment systems as per the
          provisions of the Payment & Settlement Systems Act and the Regulations framed

RBI has also set up ‗The Board for Regulation and Supervision of Payment and Settlement
Systems (BPSS)‘, the apex body for regulation and supervision of payment systems. It is
responsible for regulating and overseeing smooth functioning of the payment systems in the

Several Payment system initiatives have also been taken by RBI under various segments of
payment system. They are:

   i.     Make efforts to move away from paper based payments to the safer and more efficient
          modes of payments.
   ii.    Focus upon existing payment system products to cover more geographical areas and
          more populace in the country.
   iii.   Increase card security – Card Payments
   iv.    Increase accessibility to the public, bringing transparency and reasonableness in
          charges as far as ATM payments are concerned.
   v.     Rationalize charges for electronic payments (NEFT/ RTGS) and collection of outstation
   vi.    Issue operative guidelines for mobile banking transactions in India – Mobile Payments
   vii.   Issue guidelines on operation of pre-paid instruments in India – Pre-paid Instruments

Apart from introducing changes to make the existing Payment Systems more secure, reliable,
efficient and much more, there are several projects in the pipeline which the RBI intends to

   i.     Implement a new and feature rich RTGS system – RBI realizes a need to migrate to
          new version of RTGS with advanced technology and features in line with similar
          facilities available around the world which resultantly would infuse more flexibility in
          operations and better liquidity saving features, etc.

   ii. India MoneyLine – A 24x7 system for one-to-one funds transfers – At present,
       NEFT system operates from 9 am to 5 pm during weekdays and 9 am to 12 noon on
       Saturdays. The RBI is contemplating upon extending the NEFT function on a 24x7 basis
       or develop a new system similar akin to the Faster Payment Service in the UK that
       operates on a 24x7 basis.

   iii. India Card – A domestic card initiative – RBI is also contemplating upon a concept
        of domestic payment card (India Card) and a POS switch network for issuance and

   acceptance of payment cards. The RBI believes that there are two reasons for such a
   need to arise:

   a) The high cost borne by the Indian banks for affiliation with international card scheme
      entities in the absence of a domestic price setter, and

   b) The connection with international card scheme entities resulting in the need for
      routing even domestic transactions, which account for more than 90% of the total,
      through a switch located outside the country.

iv. Redesigning ECS to function as a true Automated Clearing House (ACH) for bulk
    transactions – At present, ECS is operational at 76 centres and making it centralized is
    underway. The RBI is also planning to implement a debit variant.

v. Mobile payments settlement network – RBI also intends to build a national
   infrastructure for facilitating real time mobile payments, realizing the need to enhance
   the present security for mobile payments. It is expected that mobile phones will emerge
   as an important mode for transmission of payment instructions.

All the above mentioned initiatives would be taken forward in co-ordination with the NCPI.

                    P Ravindra is General Manager, Compliance & Risk Management
                    with Venture Infotek Global Pvt. Ltd. A post Graduate in Sciences
                    and PGDFM, Ravindra has over 33 years’ rich and distinguished
                    experience in Banking Operations, Credit Administration, Product
                    Development, Portfolio Management, Marketing, Client Servicing,
                    Business Development with a PSU Bank and in Payment Products
                    Management and Risk Management with Venture Infotek Global Pvt.


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