The Reserve Bank of India Findings on Digital Payments Infrastructure*

Debit cards vastly outnumber the volume of credit cards issued in the country. Further, a high number of debit cards have been issued in recent times under the PMJDY, especially to customers in rural areas and smaller towns.

The growth in acceptance infrastructure has not kept pace with the growth in cards. While debit cards registered a growth of 64 percent between Oct 2013 and Oct 2015, during the same period ATMs increased by around 43 percent while POS machines increased by around 28 percent. Another disconcerting feature is that the rate of growth in setting up card acceptance infrastructure has also slowed down during these three years.

Additionally, the growth in the acceptance infrastructure has not been uniform across all locations in the country with higher concentration of such infrastructure noted in urban areas and larger towns and with larger merchants. Thus, the usage of cards has been constrained by lack of accessible acceptance infrastructure, especially in rural areas where the growth in card issuance has been very high in recent times.

Debit cards usage is predominantly taking place at ATMs as compared to POS; as a result there are issues of costs and risks associated with cash management of ATMs. The usage of debit cards at ATMs account for nearly 90 percent of the overall debit card transactions in terms of volume and around 95 percent in terms of value.

While almost every bank is a card issuer, very few banks are engaged in the activity of merchant acquiring and setting up of card acceptance infrastructure. Thus, there is concentration in acquiring business with the top 5 acquirer banks accounting (as at end-December 2015) for nearly 81 percent of the POS infrastructure and top 10 acquirers’ share of POS being above 90 percent. At the same time, the share of these banks in terms of their debit card issuance was around 41 percent (top 5 acquirer banks) and around 51 percent (top 10 acquirer banks).

In terms of merchant establishments accepting card payments, the number has increased from 8.5 lakh merchant establishments in Oct 2013 to around 11.5 lakh establishments in Oct 2015, a growth rate of 34 percent. As on Dec 2015, the number of such merchant establishments was 12.6 lakh. This increase is largely driven by increasing share of public sector banks in merchant acquisition. However, due to multiple terminalisation of the same merchant by different banks, the actual number of unique merchant establishments could be quite lower.

* Reserve Bank of India “Concept Paper on Card Acceptance Infrastructure” 08, March 2016

Growth in Acceptance Infrastructure not keeping pace with Growth in Cards
Use of cards constrained by lack of accessible acceptance infrastructure

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