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Interested in the 'Payments Market' in India? Here's a Summit by KnowledgeFaber

Interested in the 'Payments Market' in India? Here's a Summit by KnowledgeFaber

Friday October 12, 2012 , 5 min Read


Knowledgefaber is a research and consulting firm focusing on emerging opportunities in emerging countries. Picking the ‘Payments’ market which has been a very rough area in India, KnowledgeFaber is conducting a summit to bring together thought leaders and participants in the space to discuss issues and come up with solutions.For more information on the summit, you can visit KnowledgeFaber and contact them to register.

Here is how the entire Payment Industry in India looks like:

Payment Gateways in India:

Although financial transactions in India are primarily paper-driven, electronic payments have witnessed noticeable growth in the last five years. Consumers are increasingly using credit cards, debit cards and net banking for online purchases. Payment gateways serve as the starting point for all online payments and are responsible for processing online transactions in secure & confidential manner. Robust growth in e- commerce segment has led to corresponding growth in Payments gateway market in India. The market is expected to grow at a CAGR of 61% and reach $ 40B by 2016. Online travel forms the bulk of the current payment gateway target-market, with e-tailing forming a comparatively smaller market

Payment gateway market in India is currently driven by a handful of players with banks such as ICICI, HDFC , Citibank, SBI  having majority of the market share. Third-party vendors include players such as CC Avenue, BillDesk and ECS(now acquired by European firm called Ogone). With high setup costs and fragmented services, Indian payments gateway market has room for vendors that can offer holistic, end-to-end services at reasonable prices. Various domestic and international vendors have identified this opportunity and are trying to establish a foothold in the market. In the past one year, international players such as Ogone and Naspers have entered the market with domestic players such as Paytm payments, Flipkart,Gharpay, Juspay & Zaakpay entering the fray.

M - payments in India:

With 920 mn mobile subscribers (March,2012) growing at 14% year-on-year & nearly 41% unbanked population in India, M-payments has huge potential in India. Availability of affordable handsets, low mobile tariffs and increasing voice & data network coverage across the country will emerge as key drivers for m-payments in India. Lack of adequate banking infrastructure, low internet and PC penetration are expected to provide further impetus to growth of M-payments market. The market is estimated to grow from $86 mn in 2011 to $1.15 bn in 2016 at a CAGR of 68%.

Paymate, Mchek & Oxycash have emerged as major players and together make up for nearly 80% of m-payments market in India . Other players include ITZPay, ZIppay, Obopay & N.G Pay. M-payments market is witnessing favorable regulatory environment in India with RBI relaxing norms on m-payment transactions and allowing institutions other than banks to provide m-wallet services . Apart from the incumbents, new players are also offering m-payment services. My Mobile Payments ltd’s(MMPL) Money-on-mobile, an m-wallet service, Airtel money, a mobile wallet service by Airtel & partnership of comviva with MasterCard to provide open loop mobile money partnership program are some of the services launched in 2012.

Although m-payments is expected to have sizeable adoption in India, trust coupled with security issues remain major hindrances in its adoption. Lack of awareness has also emerged as a major roadblock, specifically in the rural and un-educated mass of the country.

Prepaid Instruments:

Prepaid cards segment is still very small in India, accounting for only 2.5% of total card transactions by value in the country. In FY2011, the market for prepaid cards was estimated to be $7.98 Billion (gross value) and it has been growing at a rate of 35-36% for past 2-3 years. The prepaid cards market is expected to double by 2014, propelled by the surge in adoption of salary, travel and gift cards/vouchers.

Payroll cards dominate the prepaid cards market with a 34% share, with travel cards at 19%, and multipurpose cards with a 27% market share (out of which, gift cards account for 5%).

Market is highly consolidated among three companies namely Axis Bank, ICICI Bank and Itz Cash Card, accounting for 73% of the market value in 2011.

Currently, regulatory landscape favor the banking players as non-banking players are not allowed to issue open-loop prepaid cards. They can only launch semi-closed prepaid cards (which cannot be used at ATMs or at bank counters for cash withdrawals) upon approval from RBI. There is a huge potential for the expansion of prepaid cards market in India. One of the major growth area can be use of prepaid cards for paying wages in government welfare schemes like NREGS. With adoption across various sectors like education, tourism, transit ticketing and possible relaxing of regulation to allow non-banking players to enter the market will result in high growth in Indian prepaid cards market.

NFC Technology based payment system:

NFC technology is still in a nascent stage in India, but the growth of transactions based on NFC has started to pick up on the back of increased smartphone penetration. Many banks, mobile network operators, handset OEMs and technology enablers are already implementing this technology and undertaking trial runs across the country

Mobile payments is increasingly being adopted by Indian consumers – it is estimated that the m-banking transactions have more than trebled to Rs 286 crores in May, 2012 from 91 crores in May, 2011. High growth in mobile transactions will increase the adoption rate of NFC technology. NFC is already making inroads in the healthcare payments & railway ticketing industry. However, the retail industry is yet to witness substantial adoption

Challenges in NFC: Lack of awareness, interoperability, availability of NFC-enabled devices & cost barriers pose stiff challenge.

This is just a brief overview of the numbers and position of the payment segment in India. Join us for the summit to know more and discuss solutions!