wordpress blog stats
Connect with us

Hi, what are you looking for?

With demonetization and card payments failing, the first experience for many card holders in now a disaster

money-payments-bank-rupees-cash-free

With the demonetization in swing, Manish Patel, CEO of POS terminal company MSwipe, narrated an incident to me, when a person was trying to pay for medicine using his debit card, presumably for the first time.

Patel said that the individual had a worn out magnetic stripe card which he handed to the shopkeeper who asked him to enter his PIN. The gentleman who was trying to buy medicine said that he did not know what a PIN was. He had to be prompted, that this was the same number he entered at an ATM to withdraw cash. After three attempts to enter the PIN, the card  was blocked by the bank. The man cursed and left the shop understandably upset without the medicine he needed. Note that POS terminals across the country were down across the country during the period with the additional load on machines.

“With demonetization and card payments failing, the first experience for many card holders in now a disaster. Users would be put off by the entire experience and would revert to cash because it is simple and everyone understands it,” Patel added. Many in the payments industry would agree that the first time experience is vital to make sure a customer keeps coming back to the service.

Why debit cards matter

Patel’s fears of card payments failing may have some truth to it. After cash, the most prevalent payment instrument in circulation are debit cards. The NPCI says that there are 755 million debit cards in circulation and 40% of them are on the RuPay card network (around 302 million). A majority of RuPay cards are issued under the Jan Dhan Yojana scheme for financial inclusion (the number of RuPay cards from Jan Dhan Accounts stood at 194 million) and many of them will be first time users of cards at POS terminals.

Advertisement. Scroll to continue reading.

Debit card usage in India has been mostly predominant at ATMs to withdraw cash, which the Reserve Bank of India (RBI) itself admitted. From April 2015 to December 2015, the usage of debit cards at ATMs accounted for around 88% of the transactions and around 94% of total value of debit card transactions.

Demonetization is also an opportunity to take debit card usage beyond just ATM withdrawals.

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 number of POS machines issued from banks has improved to over 14 lakh in July, as shown by RBI data.

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.

Card acceptance infrastructure must improve into villages and hinterlands else this would leave people no other option other than withdrawal of cash from the ATM.

Advertisement. Scroll to continue reading.

Need for education – MediaNama’s take

The Jan Dhan Yojana is great initiative, but financial inclusion does not stop at just at bank accounts. Right now 23.27% Jan Dhan accounts have zero balance. These account holders need to be educated about the benefits of entering the formal banking system and having savings. This would also include educating first time users on how to use debit cards and pay for transactions online and at POS terminals.

HDFC Bank has an interesting digital strategy for customers who walk into branches. All bank employees are mandated to point customers to their digital channels for their banking needs and explain to them how they can use them. It is also incentivizing customers to use its wallet PayZapp to get cashbacks and other banking apps. Similarly, banking correspondents could be instructed to educate customers on the basics of digital modes of banking.

There needs to be a conscious effort by the banks to build out a payments infrastructure to cater to the unbanked and constantly educate them about the benefits of having a bank account.

Advertisement. Scroll to continue reading.
Written By

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

Find out how people’s health data is understood to have value and who can benefit from that value.

News

The US and other countries' retreat from a laissez-faire approach to regulating markets presents India with a rare opportunity.

News

When news that Walmart would soon accept cryptocurrency turned out to be fake, it also became a teachable moment.

News

The DSCI's guidelines are patient-centric and act as a data privacy roadmap for healthcare service providers.

News

In this excerpt from the book, the authors focus on personal data and autocracies. One in particular – Russia.  Autocracies always prioritize information control...

You May Also Like

News

Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...

Advert

135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...

News

Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...

News

By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ