Long a private-sector bastion, India’s point-of-sale payments infrastructure soon should receive an unexpected and big boost from public-sector banks seeking to boost their fee revenue.
Under government directives, major public-sector banks will form a joint venture with the National Payments Corp. of India aimed at expanding their point-of-sale debit card network, a source at a public-sector bank tells PaymentsSource.
The new company would focus on only debit cards for the time being, boosted by National Payments’ plans in March to add purchasing capabilities to its RuPay debit cards to compete against international card brands (see story).
The joint venture would include the top state-run banks, card issuers and merchant acquirers, including State Bank of India Ltd., Punjab National Bank Ltd., Bank of Baroda Ltd., Bank of India Ltd., Canara Bank Ltd. and Union Bank of India Ltd., the source says.
The payment authority and the banks plan to establish a company that would deploy POS terminals on behalf of the banks in merchant outlets across India, he adds.
National Payments would switch the domestic RuPay debit card transactions.
“This is a financial play,” the source says. “Public-sector banks are joining forces because this would be the most cost effective way for them to expand their retail payments channel, not to mention also the fastest way.”
In India, merchants deploy just more than 600,000 POS terminals, but private banks such as ICICI Bank Ltd. and Axis Bank Ltd. own most of them, according to a report from the Reserve Bank of India. Merchants pay about 1.5% of each debit card sale to their acquiring bank, which in turn keeps a margin of 0.40% before paying the card issuer. Card issuers also pay the networks a switch fee.
“With private banks owning these POS terminals, it meant a lot of fee income for them, but not much for public banks that had as many cardholders in the market but not enough POS terminals of their own to get fee income,” the source adds.
India’s debit card sales in November increased 16.1%, to 43.2 billion rupees (US$880 million and 663 million euros) from 37.2 billion rupees a year earlier, according to data from the Reserve Bank of India. Debit card transaction volume increased 29.8%, to 27 million from 20.8 million, the central bank says.
Indian financial institutions had issued 259.8 million debit cards as of the end of November, up 22.7% from 211.8 million a year earlier.
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