Landscape In India
Credit & Debit Cards, NEFT, Mobile Banking
Sahil Jain 
Shubham Singhal 
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The Indian payment space stands at the edge of an important transition wherein the seeds for the
creation of a dual electronic payment architecture- card based model and the card-less model has
already been sown. Indian banking sector has made a quantum leap forward in terms of switching
over from paper-based transactions to electronic means, which include Real Time Gross Settlement
(RTGS), National Electronic Fund Transfer (NEFT), Credit Cards, and Mobile Banking etc. In fiscal
year 2012, electronic payments grew 26.8% to 1.21 billion transactions from 0.96 billion
transactions in fiscal year 2011.
The younger, tech-savvy members of the population are catching up with the trend of online bill
payments (be it recharging mobile phone, DTH service or paying your taxes). This has proved to be
a more sophisticated and simple mode of payment. Growing mobile and internet subscribers and
innovative delivery/payment models are the prime factors fueling this trend.
The size of the retail electronic payments space in India is estimated at USD 152 billion and
projected to grow to over USD 248 billion for the period Apr ‟11 – Mar ‟12.
Plastic overtaking Paper
India has been one of the fastest growing countries for payment cards in the Asia-Pacific region. .
India currently has approximately 130 million cards (both debit and credit) in circulation. Its card
market is growing at over 30% in the last three to five years. Banking customers now use multiple
cards for day-to-day activities like bill payments, shopping etc.
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Credit Cards: Though credit cards have been in India for over two decades now, only the last five
years saw a real upswing in the market. New credit card disbursals in 2012 have shot up to 0.58
million during the first three months of this calendar year, from just over 0.30 million in the
preceding quarter (October-December 2011). In addition, the number of active credit cards stands
at 18 million in Q2 2012 - highest in the last three years. Credits cards have a major contribution in
the increase in money circulation in the economy.
Debit cards: s 2009-10 was the landmark year for debit card issuance with over 44.5 million debit
cards issued in a year! The debit card market is growing faster than credit cards. Today almost 70%
of cards in circulation are debit cards; there are about 102.4 million debit cards in circulation,
amounting to US$31.3 billion by value of transactions.
This is a message-based fund transfer facility provided to bank customers to ensure transfer of
funds. Unlike RTGS where the funds is credited immediately to the payee account in real time and
the minimum amount to send is Rs. 2 lakhs, NEFT transfer takes 1 or 2 days to complete and has no
maximum or minimum limit.
RTGS/NEFT has many advantages: The remitter need not send the physical cheque or demand draft
to the beneficiary; the beneficiary need not visit his / her bank for depositing the paper instruments,
cost effective, near real time transfer of the funds to the beneficiary account in a secure manner etc.
With a contribution of USD 133 billion payments from bank accounts, NEFT has proven to be the
silent monster that has established the increasing orientation towards cashless (and even
chequeless) payments in India. Out of the total electronic payments in India, 98% come from RTGS,
and the remaining 2% come from other retail electronic payments.
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Mobile Banking and Payments
Mobile phones as a delivery channel for extending banking services have off-late been attaining
greater significance. With over 600 million connections and over 15 million being added each
month, this channel has become an important platform for extending banking services to
customers. Paymate, Obopay and mChek are the major players in this arena. Other players like
Oxycash, and Jigrahak also operate in this space.
There are four fundamental approaches to mobile banking. For simpler handsets we have
Interactive Voice Response (IVR) and Short Messaging Service (SMS). For smartphones, in addition
to these, there are two more technologies- Wireless Application Protocol (WAP) and Standalone
Interactive Voice Response (IVR) - provides a list of electronic options to the user when the customer
dials a IVR number from their phone. Customers can select an option by pressing the corresponding
number on their keypads. IVR is the least sophisticated and the least mobile of all the solutions. It
also only allows for inquiry-based transactions, so customers can’t use it for more advanced services
like payments and transfers.
Short Message Service (SMS) - SMS works in either a push mode or a pull mode. In pull mode, the
bank sends a one-way text message to alert a mobile subscriber of a certain account situation or to
promote a new bank service. In push mode, the mobile subscriber sends a text message with a
predefined request code to specific number. The bank then responds with a reply SMS containing
the specific information.
Wireless Application Protocol (WAP) - WAP is the technology architecture that makes accessing
Internet pages possible from a mobile phone. WAP provides a user experience that echoes Internet
banking conducted on a home computer. In a way it is internet banking that one does from his
computer. The customers can enjoy robust access to all the services.
Standalone Mobile Application - Some banks provide a downloadable client (app) that mobile
subscribers can use to access bank services. These mobile applications offer a reliable channel and
enable users to conduct even complex transactions. The user can make check their account balance,
make payments, transfer funds using Interbank Mobile Payment Service (IMPS) to other account
directly from the mobile device etc.
Two of India’s largest mobile operators have tied up with India’s largest banks to offer a bouquet of
mobile based banking & financial services to their customers- Airtel & State Bank of India and
Vodafone & ICICI Bank. Several offerings have emerged or are around the corner in the coming year
like Nokia Money, Airtel Money, Fino and Paymate.
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The Indian payments market has seen a sea change in terms of technological advancements and
remarkable participation and partnerships between the Government, regulator, banks, mobile
operators and other third party vendors by way of various facilities, instruments, and channels of
Banks have been partly successful in shifting customers from bank branches to branchless banking.
At the current growth trend the e-payment system in India will have an exponential growth. New
technologies and instruments will make their way into the market to facilitate electronic payments
and will result in a booming market for the ATM and card manufacturers, solution and service
providers, and card payment processing vendors. The tech-savvy generation will bring in a change
by adopting electronic payments due to its real time usability and convenience.
 Electronic payments in India: Looking Back and Surging Forward by Upendra Namburi
Payments in India going the e-Way by Prathima Rajan
 Mobile banking in India: Barriers in Adoption and Service preferences by Prerna Sharma Bamoriya and Dr. Preeti