Bank of Baroda eyes prepaid card base of 1 million in 5 years, seeks external assistance

The lender, which had 454,608 prepaid cards as of November, plans to add 100,000 prepaid cards—both domestic and foreign—every year, said the document inviting external agencies to submit their bids.

The state-run lender also had an active card rate of 25%, or 112,801 cards, higher than the banking industry average of 18%, as of November, according to data from the Reserve Bank of India (RBI). An active card is defined as one that has been used for at least one financial transaction in the past year.

The bank also has 1.1 million, including 994,062 active, wallets.

“The purpose of the RFP (request for proposal) is to seek a detailed technical and commercial proposal for (an) end-to-end prepaid card management module…" the bank said in the document.

The project includes issuing rupee prepaid cards, foreign currency prepaid cards (single or multi-currency with a minimum of 12 currency wallets), and national common mobility cards. It would also include the processing of rewards and cashback.

The agreement with the service provider will also include incentives and penalties. For instance, the bank will offer a 20% incentive—over and above the base compensation—if the service provider exceeds the annual target, provided customers make their first transaction within 60 days of card issuance and spend at least ₹50,000.

Conversely, if the service provider fails to meet the annual distribution target, the bank will impose a penalty equal to 25% of the compensation on a quarterly basis.

“Claw back will also be triggered in the case of applications found fraudulent, and cards were cancelled within 180 days with/without a single transaction," it said.

Mint's emailed queries to Bank of Baroda remained unanswered.

The UPI challenge

Among banks, NSDL Payments Bank has issued the largest number of prepaid cards, at 38.9 million, followed by HDFC Bank with 17.2 million, according to RBI data.

Experts said that although India’s fast payments platform, Unified Payments Interface (UPI), has struck a blow to other ways of transferring funds and paying for goods and services, there are some use cases for prepaid payment instruments (PPIs).

For the entire industry, the difference in volume between PPIs—an aggregate of cards and wallets—and UPI is enormous. In November, these instruments facilitated 899.1 million transactions, including payments for goods and services, fund transfers, and cash withdrawals. In comparison, UPI processed 20.5 billion transactions.

“There are forex cards that a bank can issue, and given the surge in the number of Indians travelling overseas on holiday and business trips, such cards will have a good demand," said Parijat Garg, an independent fintech consultant.

Over 30.9 million Indians travelled abroad in 2024, 10.8% higher than the previous year, showed the latest government data released in September.

Mass transit systems, such as metro rail networks, are another potential use case for prepaid cards, according to Garg. “India is building more such modes of transit, and it is only fair that the use of contactless prepaid cards go up," he said.

While UPI has impacted the popularity of PPIs, especially prepaid wallets, they are still relevant in certain cases, such as FASTag, gift cards, among others, added Garg.