Cards, e-Payments and

Settlement Systems
M V Tanksale
Chief Executive
Indian Banks’ Association

Cards, e-Payments and Settlement Systems

India - Population of 1.22 Billion with per
capita Gross National Income (GNI) – US$
No of Villages - 600+ thousand with
challenging geographical spread.
Banking services - availed by Households
All India - 58.7%
Rural - 54.4%
Urban - 67.8%

Cards, e-Payments and Settlement Systems
Scheduled Commercial Banks Branches – as on 31st
March 2013
 Total - 1,07,076
 Rural - 40,845 (38.15%)
 45.6% of Rural households still outside the formal
fold of the banking system.
 The banking services are provided through branches,
Ultra Small Branches and Business Correspondents.
 There are 1,95,380 Customer Service Personals

4 . e-Payments and Settlement Systems Status of Payment Systems:  Cash is still a dominant mode of payments  Continued effort by banks to move customers to using electronic modes of payment.Cards.  Banks continuously innovating payment products for customer convenience and efficiency.

33 Million 95. POS.Cards. Cards Jan 2012 Jan 2014 ATMs 88.73 Million 399.00 Million 93.21% 18.76% Debit Cards 268.33 Million Credit Cards 17.73 Million 6.161 Total Cards 285.99 Million 4.838 380.24% 5 .653 10.858 POS 6. e-Payments and Settlement Systems Number of ATMs.35.

 The growth of ATMs are not matching the growth of ATMs. e-Payments and Settlement Systems Banks Aaggressively deploying ATMs  Issuing Credit/Debit Cards  The Average trans per day per ATM .Cards.123 Challenge:  Increasing transactions on ATMs.  Increase the number of cards issued.  Customer Training in Rural and Semi urban areas to make comfortable using the ATMs  Deploy ATMs that speak in local languages  6 .

02 50.50% 90.60% 95.Cards.09% 95.36 88676.02% Jan-12 Debit Jan-14 95.39 53.15% 99.70% 434.79% 99.05 30.73 0.50% 17.21% 0.91% 36.99 0.34% 6.76% 0.59 54. Cards Million Trans – ATM Million Trans – POS Million ValueATMs Million Value-POS Million Credit Jan .99 6.09% 62.04% 49.98% 4.05% 45.83 1722318 84977.71% 99.14 18.91% 37.3 4.95% Jan-12 268.30% 4.74 141620.09% 63.67 1209808 50611.91% 9.19 29.96% 90.29% 0.66 380. e-Payments and Settlement Systems Card Type Period No.27 45.33 538.40% 7 .81 1089.85% 0.00 93.24% 99.57 1505.

76% Credit Cards constitute for 62.54.  The 4.  Debit cards are used on ATMs for cash withdrawals .Constitute 99. e-Payments and Settlement Systems As at end January.50% in terms of value  Debit Cards use on POS over the period of time is increasing. 8 .Cards.91%  Debit Cards use on POS . 2014.50% in terms of value of transactions on POS.15% in terms of volume and 37.

9 . Cardholders will increase PIN based Debit card usage because of the safety offered by a PIN. e-Payments and Settlement Systems      Debit card spending is growing as a natural function of the number of cards increase Because of the reluctance of people to ‘owe’ money — which happens for credit cards — when spending on goods and services.Cards. Younger people prefer to use their debit cards as opposed to credit cards. PIN based Debit Card needs to be pushed if electronic transactions are to increase rapidly.

Cards. it hides the fact that only 4.76% of the value of transactions done on debit cards on PoS.50% appears to be a respectable number.50% of the value of transactions. e-Payments and Settlement Systems   Debit card spends account for 54. While 37. 10 . the remainder is cash withdrawal from ATMs — signifying a passive potential.15% of the volume done at PoS but only 37.

11 .significantly less risky to the bank than credit card transactions. The Interchange rate is regulated by the regulators. No rational for same interchange for both credit and debit card Debit card transactions .Cards. e-Payments and Settlement Systems     The interchange is the major deterrent for growth of the Card Payments.

e-Payments and Settlement Systems    Challenges How we can increase the use of Credit/Debit Cards How we can reduce the Interchange Fees 12 .Cards.

Cards. 13 . e-Payments and Settlement Systems GAIRO Payments  The bill payments landscape in the country are mostly biller-specific and thus do not provide an environment to customers to make bill payments through an interoperable system in a seamless and efficient manner at many of the agent / customer service points that exist today.

as well as potential. 14 .Cards. e-Payments and Settlement Systems GAIRO Payments  These gaps in delivery of services in large parts of the country thus present an opportunity. for the creation of a centralised bills payment system in the country.

e-Payments and Settlement Systems GAIRO Payments  The RBI Advisory Group had recommended a tiered structure where the Bharat Bill Payment Services (BBPS) will be the authorised standard setting body (also handling settlement functions) while the Bharat Bill Payment Operating Units (BBPOUs) will be the authorised operational units.Cards. working in adherence to the standards set by the BBPS. 15 .

16% Rural Subscribers – 40.Cards.84 16 .92     Urban – 140.97 Urban Subscribers – 59. 2014  Total – 903.96 Million  Overall Teledensity – 72.40 Million  Rural – 368.53 Rural – 42.36 Million  Urban – 534. e-Payments and Settlement Systems Mobile Subscribers as on 28th February.

24X7. interbank electronic fund transfer service through mobile phones. IMPS facilitate customers to use mobile instruments as a channel for accessing their bank accounts and put interbank fund transfers in a secured manner with immediate confirmation features. 17 .Cards. ATMs and Internet Banking Channels.Immediate Payment Service (IMPS) offers an instant. IMPS transaction are initiated by the customer either using bank mobile banking application or SMS / USSD facility provided by the bank. e-Payments and Settlement Systems    NPCI .

of Mobile Money Identifiers (MMIDs) issued 58.31 million were done.21.Mobile Banking in India – Challenges for Implementation     No. In February 2014.2 million transactions amounting to ₹. 3.49 million (6.542. of banks offering IMPS services .28%) MMIDs have been issued.36 million total mobile subscriber only 58.60 No. 18 .49 million. Out of 903.

11% of the wireless subscriber market share have yet to sign the agreement with NPCI It is expected that with the Private Operators signing of the contract with NPCI for providing the USSD channel for Mobile Banking.Cards. There is potential for growth and penetration of Mobile Banking. e-Payments and Settlement Systems     One of the reason for only 6. 19 . The Private Operators who hold 89.28% of issue of MMID is at present only MTNL and BSNL have signed the contract with NPCI for providing the USSD channel for Mobile Banking Services.

 Customer education required to make them comfortable using mobile for financial transactions. e-Payments and Settlement Systems Challenge:  India’s overall mobile phone teledensity is 75. As such there is huge scope for the mobile payment development in India.Cards. What are the impediments in popularising Mobile Payments  Customer’s perception about security issues on the mobile such as shoulder surfing. possibility of hacking. Popularising steps to be followed in case of loss of instrument and other similar grievances  Employees training and comfort in using Mobile for transaction will help in conveying confidence to the customers. Out of the 932 million total mobile subscriber only 58. loss of instrument. etc. 20 .49 million MMIDs have been issued.

Lack of standardization can affect inter-operability between the different systems. Retail payment systems need to be standardized. e-Payments and Settlement Systems     Retail payment products have to be inter-operable. 21 . greater convenience for customers and dynamic efficiency through promoting competition within the financial sector. Interoperability can promote greater productive efficiency.Cards.

getting systems across different system providers to talk seamlessly is a dream. 22 .  A dream that must be dreamt and achieved and not so far in future.  If that is so.  I throw this challenge before the technical experts and service providers assembled here today. e-Payments and Settlement Systems Challenges:  Today even getting the different channels in a single bank talk to each other seamlessly is a difficult proposition.Cards.

criminals are resorting to more complex and sophisticated malware attacks.  Banks are also installing anti-viruses. social media.Cards.  Banks are ensuring strong security network by certifying against the ISO27001:2005 standards.  23 . log monitoring and many other advanced Real-Time Monitoring tools. e-Payments and Settlement Systems Challenges:  Information Security has emerged as one of the priority area of focus for banks. antiphishing. cloud computing etc. anti-malware..  With mobile computing.

e-Payments and Settlement Systems Challenges:  Data Privacy and protection of customer data is getting to be more prominent especially in the absence of data protection and privacy laws in India.Cards.  24 .

and hand held devices. financial education plays a very central role. 25 .  Challenge will be to very systematically train the trainers and equip them with product knowledge and teaching materials to reach the uninitiated and keep on doing this in a continuous rhythm till a large mass of new customers are made comfortable to transact. e-Payments and Settlement Systems Challenges:  Financial Literacy: With financial inclusion and Millions of new customers joining the financial system.  Trained persons including BCs and NGOs should be drafted to reach out to the far flung villages where they can share knowledge through films. information kiosks.Cards.

26 . cash deposit and Aadhaar to Aadhaar funds transfer.  The RuPay cards are being swiped on these POS machines for food procurement. payment of social benefits such as social security pensions. scholarships. e-Payments and Settlement Systems Financial Inclusion:  India has adopted a structured and planned approach towards FI through a bank based model.  Banks are employing Business Correspondents who reach out to persons living in very remote areas far away from bank branches with handheld POS devises.Cards. cash withdrawal. farmer credit. subsidies on LPG and PDS by various state governments and the Union government. etc. and Aardhaar cards enable balance inquiry.  Non-bank entities are allowed to partner with banks in the FI initiatives. NREGA wages.

 27 . particularly where setting up a brick and mortar branch is not viable.  BCs and the BC Agents (BCAs) represent the bank concerned and enable a bank to expand its outreach and offer limited range of banking services at low cost. e-Payments and Settlement Systems Financial Inclusion: Affordable Payment Mechanisms:  Business Correspondent Model: With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector.Cards. banks are using the services of intermediaries in providing financial and banking services through the use of Business Correspondents (BCs).  Business Correspondents are retail agents engaged by banks for providing banking services at locations other than a bank branch/ATM.

e-Payments and Settlement Systems Financial Inclusion: Affordable Payment Mechanisms:  The BCs carry a hand held device for transactions called Micro ATM.  As on 31st March.Cards. The Micro ATMs will allow customers to perform basic financial transactions using only their AADHAAR number and their fingerprint as identity proof (along with a Bank Identification Number for inter-bank transactions). 28 .341 BC-banking outlets. 2013 there are 2.21.

e-Payments and Settlement Systems Financial Inclusion: Affordable Payment Mechanisms:  Challenges in Implementation of the BC model – Operational & Viability Issues: Business Correspondent model is still in the experimental stages and there are various challenges associated with the model. 29 .  The viability of BC model has remained a critical issue for which the model is not taking off as expected.Cards.

The biggest challenge is creating the ecosystem considering that banks have such large customer bases.  PKI is not without its own challenges. e-Payments and Settlement Systems Security  One of the big challenges in card transaction is authentication of the user. etc. two factor authentication. One Time Password (OTP). 3D Secure. Verified by VISA.Cards. an RBI Working Group has recommended using PKI for increasing security of the electronic payments. EMV Chip based cards.  Many solutions including Magnetic Cards.  Recently.  Will it be practical or cost effective to provide each of these customers with the digital certificate?  30 .