Cards, e-Payments and

Settlement Systems
M V Tanksale
Chief Executive
Indian Banks Association
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Cards, e-Payments and Settlement Systems

India - Population of 1.22 Billion with per

capita Gross National Income (GNI) US$
1,270.
No of Villages - 600+ thousand with
challenging geographical spread.
Banking services - availed by Households
All India - 58.7%
Rural - 54.4%
Urban - 67.8%
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Cards, e-Payments and Settlement Systems

Scheduled Commercial Banks Branches as on 31st
March 2013
Total - 1,07,076
Rural - 40,845 (38.15%)
45.6% of Rural households still outside the formal
fold of the banking system.
The banking services are provided through branches,
Ultra Small Branches and Business Correspondents.
There are 1,95,380 Customer Service Personals
(CSPs)
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Cards, e-Payments and Settlement Systems

Status of Payment Systems:

Cash is still a dominant mode of payments
Continued effort by banks to move customers
to using electronic modes of payment.
Banks continuously innovating payment
products for customer convenience and
efficiency.

Cards, e-Payments and Settlement Systems

Number of ATMs, POS, Cards
Jan 2012

Jan 2014

ATMs

88,838

1,45,858

POS

6,35,653

10,34,161

Total Cards

285.73 Million

399.33 Million

Credit Cards

17.73 Million
6.21%

18.99 Million
4.76%

Debit Cards

268.00 Million
93.79%

380.33 Million
95.24%

Cards, e-Payments and Settlement Systems

Banks Aaggressively deploying ATMs
Issuing Credit/Debit Cards
The Average trans per day per ATM - 123
Challenge:
Increasing transactions on ATMs.
Increase the number of cards issued.
The growth of ATMs are not matching the
growth of ATMs.
Customer Training in Rural and Semi urban
areas to make comfortable using the ATMs
Deploy ATMs that speak in local languages

Cards, e-Payments and Settlement Systems

Card
Type

Period

No.
Cards
Million

Trans
ATM
Million

Trans
POS
Million

ValueATMs
Million

Value-POS
Million

Credit

Jan - 14

18.99

0.27

45.57

1505.74

141620.3

4.76%

0.05%

45.85%

0.09%

62.50%

17.73

0.19

29.81

1089.36

88676.99

6.21%

0.04%

49.29%

0.09%

63.66

380.33

538.39

53.83

1722318 84977.59

54.15%

99.91%

37.50%

90.91%

9.09%

95.30%

4.70%

434.05

30.67

1209808 50611.02

50.71%

99.91%

36.34%

6.60%

95.98%

4.02%

Jan-12
Debit

Jan-14

95.24% 99.95%
Jan-12

268.00

93.79% 99.96%
90.40%

Cards, e-Payments and Settlement Systems

As at end January, 2014,
The 4.76% Credit Cards constitute for 62.50%
in terms of value of transactions on POS.
Debit cards are used on ATMs for cash
withdrawals - Constitute 99.91%
Debit Cards use on POS - 54.15% in terms of
volume and 37.50% in terms of value
Debit Cards use on POS over the period of time
is increasing.

Cards, e-Payments and Settlement Systems

Debit card spending is growing as a natural

function of the number of cards increase
Because of the reluctance of people to owe
money which happens for credit cards
when spending on goods and services.
Younger people prefer to use their debit cards
as opposed to credit cards.
PIN based Debit Card needs to be pushed if
electronic transactions are to increase rapidly.
Cardholders will increase PIN based Debit card
usage because of the safety offered by a PIN.

Cards, e-Payments and Settlement Systems

Debit card spends account for 54.15%

of the volume done at PoS but only
37.50% of the value of transactions.
While 37.50% appears to be a
respectable number, it hides the fact
that only 4.76% of the value of
transactions done on debit cards on
PoS; the remainder is cash withdrawal
from ATMs signifying a passive
potential.
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Cards, e-Payments and Settlement Systems

The interchange is the major deterrent

for growth of the Card Payments.
The Interchange rate is regulated by the
regulators.
No rational for same interchange for
both credit and debit card
Debit card transactions - significantly
less risky to the bank than credit card
transactions.
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Cards, e-Payments and Settlement Systems

Challenges
How we can increase the use of
Credit/Debit Cards
How we can reduce the Interchange
Fees

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Cards, e-Payments and Settlement Systems

GAIRO Payments
The bill payments landscape in the
country are mostly biller-specific and
thus do not provide an environment to
customers to make bill payments
through an interoperable system in a
seamless and efficient manner at many
of the agent / customer service points
that exist today.

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Cards, e-Payments and Settlement Systems

GAIRO Payments
These gaps in delivery of services in
large parts of the country thus present
an opportunity, as well as potential, for
the creation of a centralised bills
payment system in the country.

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Cards, e-Payments and Settlement Systems

GAIRO Payments
The RBI Advisory Group had
recommended a tiered structure where
the Bharat Bill Payment Services (BBPS)
will be the authorised standard setting
body (also handling settlement
functions) while the Bharat Bill
Payment Operating Units (BBPOUs) will
be the authorised operational units,
working in adherence to the standards
set by the BBPS.
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Cards, e-Payments and Settlement Systems

Mobile Subscribers as on 28th February, 2014

Total 903.36 Million
Urban 534.40 Million
Rural 368.96 Million
Overall Teledensity 72.92

Urban 140.53
Rural 42.97

Urban Subscribers 59.16%

Rural Subscribers 40.84
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Cards, e-Payments and Settlement Systems

NPCI - Immediate Payment Service (IMPS) offers an

instant, 24X7, interbank electronic fund transfer
service through mobile phones, ATMs and Internet
Banking Channels.
IMPS facilitate customers to use mobile instruments
as a channel for accessing their bank accounts and
put interbank fund transfers in a secured manner
with immediate confirmation features.
IMPS transaction are initiated by the customer either
using bank mobile banking application or SMS / USSD
facility provided by the bank.
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Mobile Banking in India Challenges

for Implementation

No. of banks offering IMPS services - 60

No. of Mobile Money Identifiers (MMIDs) issued
58.49 million.
In February 2014, 3.2 million transactions amounting
to .21,542,31 million were done.
Out of 903.36 million total mobile subscriber only
58.49 million (6.28%) MMIDs have been issued.

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Cards, e-Payments and Settlement Systems

One of the reason for only 6.28% of issue of MMID is

at present only MTNL and BSNL have signed the
contract with NPCI for providing the USSD channel
for Mobile Banking Services.
The Private Operators who hold 89.11% of the
wireless subscriber market share have yet to sign the
agreement with NPCI
It is expected that with the Private Operators signing
of the contract with NPCI for providing the USSD
channel for Mobile Banking.
There is potential for growth and penetration of
Mobile Banking.
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Cards, e-Payments and Settlement Systems

Challenge:
Indias overall mobile phone teledensity is 75. Out of the 932
million total mobile subscriber only 58.49 million MMIDs have
been issued. As such there is huge scope for the mobile
payment development in India. What are the impediments in
popularising Mobile Payments Customers perception about security issues on the mobile such
as shoulder surfing, loss of instrument, possibility of hacking,
etc.
Customer education required to make them comfortable using
mobile for financial transactions. Popularising steps to be
followed in case of loss of instrument and other similar
grievances
Employees training and comfort in using Mobile for transaction
will help in conveying confidence to the customers.
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Cards, e-Payments and Settlement Systems

Retail payment products have to be inter-operable.

Retail payment systems need to be standardized.
Lack of standardization can affect inter-operability between the
different systems.
Interoperability can promote greater productive efficiency,
greater convenience for customers and dynamic efficiency
through promoting competition within the financial sector.

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Cards, e-Payments and Settlement Systems

Challenges:
Today even getting the different channels in a single bank talk
to each other seamlessly is a difficult proposition.
If that is so, getting systems across different system providers
to talk seamlessly is a dream.
A dream that must be dreamt and achieved and not so far in
future.
I throw this challenge before the technical experts and service
providers assembled here today.

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Cards, e-Payments and Settlement Systems

Challenges:
Information Security has emerged as one of the priority area of
focus for banks.
Banks are ensuring strong security network by certifying against
the ISO27001:2005 standards.
Banks are also installing anti-viruses, anti-malware, antiphishing, log monitoring and many other advanced Real-Time
Monitoring tools.
With mobile computing, social media, cloud computing etc.,
criminals are resorting to more complex and sophisticated
malware attacks.

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Cards, e-Payments and Settlement Systems

Challenges:
Data Privacy and protection of customer data is getting to be
more prominent especially in the absence of data protection and
privacy laws in India.

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Cards, e-Payments and Settlement Systems

Challenges:
Financial Literacy: With financial inclusion and Millions of new
customers joining the financial system, financial education plays
a very central role.
Trained persons including BCs and NGOs should be drafted to
reach out to the far flung villages where they can share
knowledge through films, information kiosks, and hand held
devices.
Challenge will be to very systematically train the trainers and
equip them with product knowledge and teaching materials to
reach the uninitiated and keep on doing this in a continuous
rhythm till a large mass of new customers are made
comfortable to transact.
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Cards, e-Payments and Settlement Systems

Financial Inclusion:
India has adopted a structured and planned approach towards
FI through a bank based model.

Non-bank entities are allowed to partner with banks in the FI

initiatives.
Banks are employing Business Correspondents who reach out to
persons living in very remote areas far away from bank
branches with handheld POS devises.
The RuPay cards are being swiped on these POS machines for
food procurement, farmer credit, etc. and Aardhaar cards
enable balance inquiry, cash withdrawal, cash deposit and
Aadhaar to Aadhaar funds transfer, payment of social benefits
such as social security pensions, scholarships, NREGA wages,
subsidies on LPG and PDS by various state governments and the
Union government.
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Cards, e-Payments and Settlement Systems

Financial Inclusion: Affordable Payment Mechanisms:
Business Correspondent Model: With the objective of ensuring
greater financial inclusion and increasing the outreach of the
banking sector, banks are using the services of intermediaries in
providing financial and banking services through the use of
Business Correspondents (BCs).
Business Correspondents are retail agents engaged by banks for
providing banking services at locations other than a bank
branch/ATM.
BCs and the BC Agents (BCAs) represent the bank concerned
and enable a bank to expand its outreach and offer limited
range of banking services at low cost, particularly where setting
up a brick and mortar branch is not viable.

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Cards, e-Payments and Settlement Systems

Financial Inclusion: Affordable Payment Mechanisms:
The BCs carry a hand held device for transactions called Micro
ATM. The Micro ATMs will allow customers to perform basic
financial transactions using only their AADHAAR number and
their fingerprint as identity proof (along with a Bank
Identification Number for inter-bank transactions).
As on 31st March, 2013 there are 2,21,341 BC-banking outlets.

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Cards, e-Payments and Settlement Systems

Financial Inclusion: Affordable Payment Mechanisms:

Challenges in Implementation of the BC model Operational &

Viability Issues: Business Correspondent model is still in the
experimental stages and there are various challenges associated
with the model.
The viability of BC model has remained a critical issue for which
the model is not taking off as expected.

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Cards, e-Payments and Settlement Systems

Security
One of the big challenges in card transaction is authentication
of the user.
Many solutions including Magnetic Cards, EMV Chip based cards,
two factor authentication, One Time Password (OTP), 3D
Secure, Verified by VISA, etc.
Recently, an RBI Working Group has recommended using PKI
for increasing security of the electronic payments.
PKI is not without its own challenges. The biggest challenge is
creating the ecosystem considering that banks have such large
customer bases.
Will it be practical or cost effective to provide each of these
customers with the digital certificate?

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THANK YOU

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