First Data sets eyes on govt transactions

First Data sets eyes on govt transactions

Mumbai: Two years after buying ICICI Bank Ltd’s majority stake in its point-of-sale (PoS) terminal network, US-based First Data Corp., the largest electronic payments provider in the world, has set its eyes on processing government transactions linked to the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), utility bill payments and railway booking transactions through its PoS network.

First Data will add 50,000 terminals in 2012 to its existing 180,000 terminals.

“We want to invest wherever the opportunity like NREGA payments, public distribution systems electronification. We need to drive more products through our channel," B. Amrish Rau, vice-president and country manager at First Data India, said in an interview on Monday.

First Data declined to give exact numbers.

From 150,000 PoS terminals then, ICICI Merchant Services now has more than 180,000 terminals.

Axis Bank Ltd has the largest network of terminals at 192,000 followed by ICICI. HDFC Bank Ltd is third with more than 125,000 terminals in the market.

Merchants pay 1.1-1.8% of the purchase as fee besides installation charges to use the network, which is shared between the bank that has issued the card under transaction and the bank that has installed the machine.

Banks earn fees and also get cheap funds through current accounts that merchants open. They also cut costs by building their own network as they do not need to move money in physical form.

First Data estimates 170 million transactions in India every year, more than half of which is processed on their network.

“Electronic payments market is $0.5 billion, through automated teller machines (ATMs), PoS and mobile payments. The value for only merchant transactions is $120-125 million," Rau said.

Though the number of credit and debit cards in India has gone up rapidly to more than 273 million as of October from just 63 million in 2005-06, India is still a nascent market compared with other emerging nations. For instance, China has 900 million cards with two million PoS terminals. In comparison, India has 500,000 terminals.

Indians bought goods and services worth 75,515.68 crore through credit cards in 2010-11, up from 33,886.47 crore in 2005-06, data from Reserve Bank of India (RBI) shows.

The growth in debit card transactions has been more robust with 38,690.65 crore being spent in 2010-11 up from just 5,897.14 crore in 2005-06.

Bankers are particularly happy with the rise in debit card transactions. For every credit card, there are at least four debit cards.

“When the debit card transactions take off, the opportunity is huge. How can we grow the sectors is one of the biggest challenges and then how do you go deeper into the segments of markets like Mumbai," Rau said.

Paul Abraham, chief operating officer at private sector IndusInd Bank Ltd, said data from RBI shows that spending through PoS terminals is increasing and hence the market will continue to grow.

“However, the challenge is to build last mile connectivity in the villages in which MNREGA exists to enable villages to transfer money electronically for their daily needs," Abraham said.

But First Data’s Rau is unfazed. “We believe that the market is at the start of an inflection point; we have had a 50% growth on a year-on-year basis and we feel that can continue for the next five years," he said.

Globally, First Data has 80 joint ventures with banks such as Citibank NA, Bank of America Corp. and Standard Chartered Plc.

Rau said the parent company is open to more ventures similar to ICICI Bank.

“We can create another alliance with another institution and bring in merchants through the same network. If need be, we will partner with someone else but at this time there is no need, there is much work to get a huge opportunity."

joel.r@livemint.com

Close