Introduction to India

As the 11th largest card market, and projected to rank 7th for 2011 [1], India promises a wealth of opportunities. Many global payment trends [2] have taken hold in the India payments market and are poised to transform it. Trends include the rise of mobile-based payment technologies, Internet payments, contactless payment products, and debit and prepaid,

The growth opportunity in India’s cards and payments market has been witnessed by many outside entities during the past few years. Consequently, India has become a key target for foreign investment, for issuers and acquirers alike, including HSBC, Standard Chartered, Citibank, RBSG, Deutsche Bank and Barclaycard, who are all engaged in the market through organic focus or acquisition strategies.

At the heart of market demand is a growing population of more than 1.18 billion, which is the second largest after China [3]. The relatively young, technologically savvy population (more than half of whom are under the age of 25, with about 30 percent younger than age 14) is fueling demand for new payment options and innovative delivery channels that offer more convenience and safety than traditional cash and checks.

India has been cited as one of the first countries to emerge from the global crisis by the International Monetary Fund [4], with gross domestic product (GDP) growth pegged as the fifth highest in the world [5]. The growing, affluent middle class contributes to the fast-paced economic evolution. India has weathered the global financial downturn better than most countries, as its domestic consumption accounts for more than exports, and its value of high-tech, service-oriented businesses further sets it apart from other emerging markets [6]. Still, relatively underdeveloped in terms of infrastructure, largely due to its vast rural landscapes, India has a large population of unbanked or underbanked consumers that is estimated to make up more than 70 percent of its total population. This high concentration has given rise to rapid mobile adoption, which has been marked by mobile subscriptions that have grown from an astonishing 150 million in 2007 to more than 800 million in 2011 [9].

The Indian regulator, the Reserve Bank of India (RBI), has also undertaken several initiatives to encourage ‘financial inclusion,’ and has actively focused on promoting electronic payments. This stewardship continues to strengthen the cards and payments market and has helped encourage payment innovation. Although India is still a cash-based society, there is evidence of a market shift to electronic payments with growing card acceptance. It is estimated that more than 216 million debit cards are currently in circulation, with debit card payments totaling just more than $8 billion. Projected growth is aggressive, with 400 million debit cards forecasted for 2013 [8], with similar rapid growth for prepaid cards. From a merchant acceptance standpoint, there are almost 600,000 point-of-sale (POS) terminals with rapid growth and diversification of acceptance locations beyond major metropolitan cities to smaller cities and rural areas across India. The push to service rural India can be seen by a recent order placed by the SBI for more than 545 ATMs in rural areas, 300 of which will be solar powered for use in villages with recurring power shortages [7]. Until recently, credit cards had seen slow growth, but forecasts predict that 30 million credit cards will be in circulation by 2013 [8].

With the increasing use of multiple payment options and a clear shift away from cash in India and across Asia, issuers and acquirers face numerous challenges on the outset, cost. There are a number of key influences that drive payment strategies, such as rising technology costs, increased regulatory oversight, bank consolidation, and rising fraud and security challenges. To meet these demands, issuers and acquirers are faced with a number of options, such as developing a new payments platform in house, licensing an existing platform or outsourcing the work. With India being a leading market for contracted solutions, many financial institutions are partnering with global third-party processors such as TSYS. Other financial institutions are opting to license payment platforms from large software and service providers like TSYS, differentiating themselves in the market through customized platforms for their unique needs and payment products.

Payment processors can provide platforms that can be scaled and enhanced as the issuer or acquirer grows its cards business and as the overall market evolves and matures. The flexibility of the offered licensing and processing models, along with the breadth of global experience, knowledge of best practices and local presence, all become a key differentiator for processors in the industry.

Although still at a young stage, the India prepaid market is rapidly evolving, having grown by more than 40 percent in 2008 and projected to grow 75 to 100 percent in the years ahead. Notably, more than 95 percent of mobile subscribers are prepaid users, and have experience with paying for services in advance. The opportunities are vast for prepaid products and services in one of the world’s fastest growing economies. From a demographic standpoint, the middle class (defined by annual household incomes of at least $3,300 per year) is 374 million strong and growing at a rate of 20 million people per year. [6]

Research from ICICI Bank suggests the potential for prepaid payments to grow in India by $7.6 billion globally by 2011, eventually overtaking debit card payments. Other prepaid opportunities include public distribution of funds and essentials, government benefits, healthcare, transportation (automated fare collection) and global and domestic remittances. According to a recent VRL report, 34 percent of prepaid cards are payroll, 24 percent are travel, 22 percent are multipurpose, 14 are remittances and the remaining 6 percent fall in other categories [7].

TSYS has taken a leading role in the development of prepaid products in India, in 2009 sponsoring the creation of an India chapter of the Prepaid International Forum (PIF), a UK-based not-for-profit organization. TSYS is also working with the forum and its prominent bankmscheme and non-bank members to approach RBI with a view of how PIF India can help shape legislation and stimulate the growth of prepaid. According to an Edgar Dunn 2009 survey, regulators are expected to be the most influential market participant over the next five years in Asia.

Currently in India, vast majority of card transactions are supported by Visa and MasterCard [7]. However, the Reserve Bank of India recently helped create a new entity in The National Payments Corporation of India which will play a role by providing a third option for similar payment services. India is following the lead of China, which created its own national payments system through China UnionPay. The NPCI ownership is divided among six public sector banks holding 51 percent of shares (State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India), along with two private sector banks (ICICI Bank and HDFC Bank) and two foreign banks (Citibank and HSBC) [7].

Previously limited, the Indian market has started to focus on acquiring a market segment with enormous potential for growth and one of the lowest POS penetrations in the world given its market size. There’s a mere 0.05 POS devices per 1,000 capita in India [9] compared with 1.95 POS devices per 1,000 capita in Brazil [10], 0.25 in China [11] and 19.74 in the U.S. [12]. Indian banks are broadening their ATM networks to expand distribution reach by installing additional POS terminals at merchant establishments across the country. There are more than 78,000 ATMs in the country currently, 13,000 of which were added between 2009 and 2010 alone. To put these numbers in perspective, the penetration rate of 43 ATMs per million people in India is less than one-fourth of China’s rate of 183 per million, indicating significant room for growth [9]. Industry research analysts also predict that the Indian retail e-payment market is likely to grow by more than 50 percent annually during the next few years [2]. Future growth potential in this market is tremendous, given the current low payment card penetration coupled with low card spending. These trends are projected to change with growing card acceptance, proliferation of electronic payment options and increasing consumer education and awareness.

Overall, the Indian market is evolving at an incredibly rapid pace, and experts are predicting that it may leapfrog established Western payments markets in the near future.


1. Euromonitor MIS

2. 2009 Global Payments Trend Survey Overview, Edgar, Dunn & Company, 16 December 2009

3. CIA, The World Factbook, March 2010,

4. IMF Survey online, February 5, 2010,

5. Annual GDP growth slowed to 6.1% in 2009 but still second highest growth in the world among major economies, CIA, The World Factbook, March 2010

6. The Economist World in Figures 2010 Edition

7. VRL report: The Indian Prepaid Cards Market, 2010

8. RNCOS Estimate, RNCOS Indian Payment Card Market Forecast to 2012