2. Agenda
• Why POS?
• Current market scenario
• RoI on a POS Terminal
• POS Business model
• Trends and growth drivers
• Major Players
• Where would I put my money?
3. Why POS?
• 250 billion global non-cash
payment transactions, India
accounts for 0.2%
• The use of cards continues to be
the single strongest driver of
global non-cash payments
volumes. Global card transactions
(credit and debit) grew 14.5% in
2007.
• India is a cash economy
• Banks’ aggressive stance
• “POS is present in 400 to 600 cities
whereas cards are issued in 4,000
locations!”
Regions Cash as a %age of total money supply
India 18% to 20%
Developed countries 5% to 6%
Developing countries
(ASEAN)
8% to 10%
0.5
4
5
7
7
8
9
15
22
55
99
0 20 40 60 80 100 120
India
Russia
Australia
Japan
South Korea
Brazil
Canada
United Kingdom
China
Eurozone
USA
Top 10 Non-cash payment transactions
73.7% were
made by cheque
Region % of Worldwide
Market
% of Global
Population
% of Global
GDP
USA 39% 5% 28%
Eurozone 22% 5% 24%
China 9% 21% 6%
United Kingdom 6% 1% 6%
Canada 3% 1% 3%
Brazil 3% 3% 3%
Japan 3% 2% 9%
South Korea 3% 1% 2%
Australia 2% 0.3% 2%
Russia 2% 2% 3%
Total 92% 40% 84%
India 0.2% 18% 2%
ATM POS
4. ICICI
Bank, 180,000
Axis
Bank, 114,500
HDFC , 70,000
HSBC, 15,000 POS Terminals
4.27 Lakh POS Terminals
deployed
Key players:
1. Venture Infotek
2. Prizm Payments
3. MRL Posnet
4. Reliance Money*
5. Financial Technologies
6. TVS-Electronics
Cash that moved through
POS in 2008-09: Rs. 83,903
crores.
Card issuer Bank
Merchant
Cards issued
Merchant Acquirer Bank
Visa/ Mastercard Settlement
Gateway
1% to 1.2%
Rs. 839 crores to
Rs. 1,007 crores
0.3% to 0.5%
Rs. 250 crores to Rs. 420 crores
0.3% to 0.7%
Rs. 250 crores to Rs. 600 crores
ICICI, 70
.00
HDFC, 4
0.30
HSBC, 3
5.00
SBI, 27.0
0
Citibank
, 25.00
Credit Card
Base: 247 Lakhs
SBI, 406
ICICI, 140.00
Axis
Bank, 117.00
HDFC, 90.00
Punjab
National
Bank, 67.00
Canara
Bank, 57.50
Andhra
Bank, 40.78
Bank of
Baroda, 35.00
Debit Cards Base:
1,374 Lakhs
5. • All banks pushing debit
cards.
• Expectation from
increasing penetration of
POS terminals – to increase
average annual spend per
debit card.
19557
17888
21049
26461
1185 1090 1222 1350
2006 2007 2008 2009
Average annual credit card spend (INR) Average annual debit card spend (INR)
25686
33886
41361
57985
65356
5361 5897
8172
12521
18547
2005 2006 2007 2008 2009
Credit Card (INR Crores) Debit Cards (INR Crores)
141.05 173.27 231.23 275.47 246.99 226.64
355.01
497.63
749.76
1024.37
1374.31
1732.75
2005 2006 2007 2008 2009 2010 (P)
Credit card base (in Lakhs) Debit card base (in Lakhs)
Cards market
Share at POS terminals Average annual spend per card
6. ROI on a POS Terminal
Bank
Merchant
Bank
partner
1. +20% rule
2. CRM: Cash Register
Management!
3. MDR v/s Opportunity cost
4. Bank Relationship
Management
1. SBI: 5,00,000 POS
Terminals over the next
3 years.
5. Merchant classification
Monthly card
business (INR)
Avg. per
transaction
No. of
transactions
Variable cost
(Re 1/-)
2% Rental Total cost % cost
1,00,000 500 200 200 2,000 200 2,400 2.40%
2,50,000 700 357 357 5,000 200 5,557 2.22%
5,00,000 1,000 500 500 10,000 200 10,700 2.14%
7,50,000 1,200 625 625 15,000 200 15,825 2.11%
10,00,000 2,000 500 500 20,000 200 20,700 2.07%
12,50,000 2,000 625 625 25,000 200 25,825 2.07%
15,00,000 2,500 600 600 30,000 200 30,800 2.05%
20,00,000 2,500 800 800 40,000 200 41,000 2.05%
25,00,000 3,000 833 833 50,000 200 51,033 2.04%
50,00,000 5,000 1,000 1,000 1,00,000 200 1,01,200 2.02%
7. POS Business Models
• Bank acquires merchant
• Bank installs own POS
• Bank maintains POS
• Bank charges
rental, transaction fees
and maintenance fees
from merchant.
• BP acquires merchant
• BP takes POS on lease
from Bank
• BP installs POS
• BP maintains POS for a
rental from merchant/
transaction %age.
8. Trends and Growth drivers
• Debit card transactions v/s credit card
• SBI’s plans
• Hindrances in implementation of mobile
payments
– Interoperability
– RBI regulations
• Prepaid/ smart/ sim cards
• Indiapay
10. Before Indiapay After Indiapay
Visa/ Mastercard
settlement gateway
Merchant
Bank payment
gateway
Merchant
Bank payment
gateway
POS POS POS POS
INDIAPAY
Merchant
Bank payment
gateway
Merchant
Bank payment
gateway
POS POS POS POS
11. Major Players
• Problems plaguing these players:
– Per terminal revenue: Rs. 50/- to Rs. 55/- per year
– Merchant acquisition
– Rural strategies and regulatory constraints
Company Annual
Revenue
Installed base USP Venture
funded by
Venture Infotek INR 80 crores in
FY 2009 (E)
1,60,000 First-mover Promoters
Prizm Payments About a crore
(E)
3,500 End-to-end
solution provider
Sequoia
12. Where would I put my money?
• Nascent phase of the industry.
– POS and ATM are driving card adoption
• POS terminal installation and maintenance is a
small market and a low margin game.
– Very small market, about Rs. 400 crores annually.
– Volumes are growing, but ATMs already there.
– Might become door-openers for pure ATM
manufacturers like Vortex to increase their margins.
– Prizm and Venture Infotek exploring tie-ups with
Vortex for inclusion of ATMs in their portfolio.
In just six years (between 2001 and 2007), developing countries’ share has jumped from 9% to 20%, led by CEMEA and BRIC (Brazil, Russia, India and China), in which annual growth was around 25% during the 2001-07 period.
Debit cards accounted for 57.5% of total non-cash purchase transactions in 2008, up from 22.9% just ten years earlier. Debit cards first overtook credit cards as the preferred means of US consumer payments in 2004, and their rise has been notable ever since. Still, the economic downturn made credit cards even less popular in 2008, and the debit cards’ share of transactions grew by 5 percentage points from 2007.
