cash only

Update: MediaNama spoke to Manish Patel, CEO of POS machine company Mswipe who spoke told us that card networks are unable to deal with the sudden surge in payments on their networks. He added that on Saturday between 7 pm to 9.30, pm Visa’s servers failed but POS machines were still able to process payments from MasterCard.

MediaNama was unable to independently verify this but we have written to Visa and will update once we hear from them.

Meanwhile, Mswipe said that it saw a huge surge in the number of transactions it processed. Typically, Mswipe processes 45,000-50,000 transactions a day. On Friday, this number went up to 1 lakh transactions and to 1.25 lakh transaction on Saturday. On Sunday, Patel added the number of transactions went above their capacity to process them and that they are currently adding more capacity.

Earlier: POS terminals across the country suffered outages for several hours over the weekend and many card transactions were declined according to multiple people who spoke with MediaNama. For example, card transactions at a restaurant in Mumbai’s Mulund West was down from 7 pm to 10 pm on Friday, and there was a similar outage the next day. The restaurant owner told MediaNama that he had contacted ICICI Bank about the outages, and they attributed it to the demonetization drive, saying they needed some more time to recalibrate. Many stores in the neighbourhood also could not process card payments, and insisted that customers pay by cash. MediaNama’s Salman SH and Sneha Johari reported similar outages in Bangalore and Pune.

Also read: MediaNama’s Demonetization Liveblog, with the latest updates.

In Bangalore, a pubs POS terminals were down on Saturday morning. The pubs owner also said that he had to to accept bank transfers from customers to his account. The owner added that all six POS terminals were down due to increased volumes on card payment networks.  The POS machines displayed an error code “server down”.

On Sunday, Damodar Mall, CEO of Reliance Retail tweeted about card payments getting declined and appealed to ICICI Bank and HDFC Bank for help.

We have written to ICICI Bank, HDFC Bank and Axis Bank for comments regarding the outages. Meanwhile, State Bank of India (SBI) tweeted that it processed 10.05 lakh POS transactions on Sunday. To give context, SBI processed 3,25,00,690 debit card transaction over POS terminals in July, according to RBI data.

Meanwhile Rahul Kotari, business head of PayUbiz, told MediaNama that the payment gateway has seen a spike in the number of transactions from around 750,000 a day to 1.5 million a day following the demonetization. Note that PayU also has a POS machine for offline transactions and process them through its payment gateway. He added that the payment gateway is built to handle five times its current load and is increasing it to 10 times anticipating a surge in online transactions. Kothari added that the company is considering deploying QR codes in the short term for offline merchants to help ease the pain of doing business.

Asymmetry in POS terminals

As we have pointed out many times, India has the dubious honour of having one of the lowest POS terminal penetration, according to a 2015 Ernst and Young report.  The report said there were only 693 machines per million of India’s population, compared to similar emerging countries such as Brazil, which has 32,995 terminals per million people and China and Russia, each of which has around 4000 terminals per million people.

The Reserve Bank of India’s data shows that there are over 697 million debit cards and 25.94 million credit cards and there are only 14,43,899 POS terminals in the country.

A closer  look at the POS terminals deployed in the country, we see a curious concentration. The top banks in the country – State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Corporation Bank – have the highest number of POS terminals accounting for 80.94% of all terminals in the country.