India's merchants are beginning to embrace mobile card readers, fueled by the nation's growing dependence on payment cards and smartphones.

Unlike the United States, where Square holds significant mindshare in mobile payments, India's mobile point of sale market is still up for grabs as a number of established companies and emerging players—such as Mosambee, Ezetap, Paymate, and Hitachi's Prizm Payments—vie for business.

And experts predict explosive growth fairly soon. "India is estimated to have less than 20,000 mobile points-of-sale today … Based on market estimates, there should be over 100,000 mPOS devices in the market by the end of this year," says Aditi Khandelwal, project manager for marketing for MasterCard in India.

Mobile point of sale providers in India have had to adjust to meet regulatory guidelines,  Khandelwal says. "Now there are over 10 mobile POS players in India at various stages of market readiness."

Cases in point: After partnering with Citibank last January and launching a $50 reader for magnetic stripe and chip cards in July, Bangalore-based Ezetap has reportedly sold more than 15,000 mobile card readers. Mumbai's Mosambee, which also began to roll out its card readers in India in July 2013 (after selling them in Dubai and United Arab Emirates since November 2012), has already activated more than 1,200 users, according to Sameer Chugh, head of alliances and strategy for Mosambee.

Anticipating sharp growth, Chugh says he expects the user base for his company's services to climb to 5000 by the end of June and multiply to 25,000 by the end of the year. Mosambee typically charges less than $6 a month for use of its mobile card reader.

Hitachi's Prizm Payment Service, which uses hardware from MSwipe Technologies,  has sold roughly 7,000 card readers in India since August 2012, according to Jayant D'Mello, director of Prizm Payment Service. The company also white-labels a merchant option through Axis Bank of India, says D'Mello. So far, its typical merchant customers are quick-serve restaurants, retail shops, insurance agents, e-commerce companies and gas stations.

These companies have a potential for growth as India's banking, card-wielding and smartphone-using populations all take off. Although India, until recently, has seen less than 5% of its merchants accept card payment due to technology constraints and the risk of fraud, according to Khandelwal, he expects mobile point-of-sale options to make card acceptance affordable for smaller merchants.

"In the initial stages, mobile point-of-sale will open up categories which could not accept cards due to lack of a technology solution," Khandelwal says. These categories include insurance agents, cabs and delivery services, and the next wave will include small business owners, he says.

Chugh says Mosambee is seeing a lot of recent interest from "the small mom-and-pop stores who so far have not yet seen it feasible to deploy POS machines or accept cards as a payment method."

While there are already more than 300 million debit and credit cards in circulation in India, Chugh estimates there are just over 1 million traditional point of sale machines. "A large number of cards in India are still inactive," he says. "But with the increase in spend via digital channels including cards, merchants are now expected to offer card acceptance to consumers or potentially lose sales."

People are more comfortable using cards when they can use a PIN for added security, he says.

Prizm's D'Mello adds that the large and growing base of roughly 900 million mobile phone users "lends itself to a mobile-based payment service."

The recent spate of acquisitions, partnerships and funding deals would seem to highlight the energy that surrounds this burgeoning business in India. Earlier this year, Ezetap raised $8 million investment in Series B funding, led by Helion Advisors, on plans to radically expand its mPOS presence throughout southeast Asia and Africa. Mobile POS device maker MSwipe raised an undisclosed amount of Series B funding, coming from Matrix Partners, Axis Bank and DSG Consumer Partners, on the heels of partner Prizm's acquisition by Japanese electronics giant Hitachi, which was approved in February. In April 2013, Mosambee raised $1 million in funding from SIDBI Ventures.

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