India, one of the fastest growing economies in the
world, presents a wealth of opportunity for the prepaid and debit
card market – with only a predicted 10% of the population owning a
card. The following excerpt from the VRL report, Debit and
Prepaid Cards Market in India, describes the challenges
ahead.
Go deeper with GlobalData
Should market watchers be impressed and excited by
the opportunities presented by the low penetration of prepaid cards
in India – an estimated 3.5m to 4m cards in a country with a
population of 1.2bn and a median age of 26 – or should they be
wary?
The most recent wave of financial
deregulation in India is almost twenty years old, yet prepaid and
debit cards in general remain very much the exception. One estimate
– with 189m debit cards of all sorts issued in India and assuming
one-third of holders have two cards – suggests only 10% of the
population have prepaid or debit card ownership (although ICICI put
the figure at 20%), and that is before one tries to establish the
level of inactive card ownership.
Yet the macro environment remains
tantalising for the roll-out of more sophisticated financial
products. High single-digit GDP growth since 1997, domestic
consumption accounting for two-thirds of the economy (twice the
level of China), and a middle class estimated to be increasing by
20m a year should be considered against the background of the 400m
people in India that do not have a bank account.
Visa, the international card network, quantifies the
target market for credit and debit cards in India at 200m. There is
an argument for saying that it is this combined 600m which should
be considered the target market for prepaid cards, as these cards
have attractions beyond the middle classes with benefits for the
rural poor seeking more flexible payment and transaction
options.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe expansion of prepaid cards and
banking services out from metropolitan areas will necessitate a
strong telecom network. Investment in the sector nationwide in 2010
has doubled to $40bn since 2009. It is worth noting that India
remains the world’s fastest-growing telcos market and teledensity
(defined as the ratio of the total number of phone per population)
will reach saturation point soon after 2012. Teledensity was only
11% as recently as 2006.
This is an attractive back-drop for ‘mobile wallets’.
Many services providers have grasped the opportunity to roll-out
low-cost banking and remittance services throughout rural India.
ICICI, HDFC and Axis in the private sector banks and State Bank of
India (SBI) in the public sector are arguably the most influential
domestic players in the Indian prepaid market.
There is intense expenditure
currently underway in the payments infrastructure space, crucial
for the successful take-up of prepaid cards. Close to $330m will be
invested by all banks in the ATM infrastructure annually for the
next few years in an attempt to close the country’s very low ATM
penetration rate of 47 ATMs perm head of population (comparable
statistics for China and Malaysia are 183 and 432).
As for POS terminals, the private
sector banks are taking the lead, but even SBI will be injecting
$111m over the next five years to ramp up its presence. The total
number of POS terminals in India is estimated to rise from a
current 540,000 to 1.2m by 2015.
The continuing rollout of prepaid
and debit cards in India will continue to show supernormal growth
characteristics for the foreseeable future, with catalysts namely
the expansion in the numbers classified as ‘middle class’, banks
building up their payments infrastructure, government directed
efforts to ‘bank the unbanked’ and improving the communications
infrastructure in rural areas. <
This article is an edited
passage from the VRL report Debit and Prepaid Cards Market in
India. For more information on this or other VRL reports,
contact Jeannie Lam on jeannie.lam@vrlfinancialnews.com.
