40% of the terminals will be in metros.
State Bank of India, the country’s largest lender, plans to set up 600,000 point of sale (PoS) terminals as part of its plans to foray into merchant acquiring business (MAB).
This is at least 27 per cent more than the 473,000 PoS terminals operating across the country at present.
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While SBI plans to set up the PoS business through a joint venture, the 600,000 machines are proposed to be rolled out over five years, by which time the PoS population would have also increased. At present, a bulk of the terminals are located in metros, large cities and a few tourist destinations.
Around 40 per cent of the terminals to be deployed by SBI would be set up in metros and major urban centres, while the rest would be in Tier-II and Tier-III centres.
“In the smaller cities, there is a large cash economy which is at work and there is a growing realisation to reduce the dependence on cash. So, we can exploit that opportunity,” said a bank executive.
Bankers, however, said ICICI Bank and Axis Bank were the two large players in the market and they had now started focusing on smaller towns as well. ICICI Bank, India’s largest private sector bank, has decided to spin-off its PoS terminals firm.
Keeping with its plans to grow business beyond Indian shores, SBI intends to roll out the terminals at overseas locations in the second phase. Asian countries where bank has substantial network would be a focus segment, bank executives said. A PoS terminal is popularly known as swiping machine issued to a merchant establishment to facilitate cashless sale of goods and services by the swiping debit, credit or pre-paid cards.
A senior SBI official said the bank’s decision to enter the business was driven by the growing organised retail business. The increased use of plastic cards and technology, including core banking platform, government’s drive to shift activities to electronic channel also influenced out decision. In the first year of operation, the bank intended to install 125,000 PoS terminals.
The country-wide roll out will cover all business verticals like merchants (very small, medium, large and corporate), hospitals, e-commerce, toll collection, transportation (automatic fare collection), utility bill payments, parking plazas and mobile top-ups.
On the joint venture arrangement, the bank official said JV would do marketing and acquiring activities. The JV partner is expected to bring in expertise in terms of manpower and technology.
While SBI will acquire equity in JV at par, the partner may pick up stake at premium. The entry into the business was aligned with SBI group’s plans to expand its business by opening very large number of branches and ATMs in the next five years, sources said.
The State Bank Group has over 160 million customers and has issued over 55 million debit cards that command around 38 per cent of market share. It is issuing around 30,000 debit cards daily. The central bank’s decision to allow withdrawal of cash from PoS terminals, where customers swipe their credit or debit cards to pay for purchases is also expected to give boost the business volumes. Customer can withdraw cash up to Rs 1,000 per day through debit cards issued in India.
