The target market
The number of Indian prepaid cards in issue is almost
embarrassingly small. According to the Prepaid International Forum
there are around 4 million prepaid cards in India. This
comprises a mere 2% of total debit cards (there are 185 million
debit cards in India), but the targeted population for prepaid
cards by any measure has to be considerably larger. A recent
estimate by Visa Inc puts the target population for credit and
debit cards in India at 200 million. Yet there are about 400
million adult Indians who don't have a bank account. It is this
combined 600 million which should be viewed as the true target
market for prepaid cards.
The existing market for Indian debit/prepaid
cards
Unsurprisingly the Indian card market is fast growing, and the
pace is accelerating. Industry observers point to strong
similarities between the growth of the Indian mobile phone market,
and that for Debit and Prepaid cards. The Compound Annual Growth
Rate of mobile phone take up in India during 2006-2010 was 52%. By
comparison the number of debit cards issued rose from 18.1 million
in 2003 to 184.79 million in 2009, +47% CAGR. The transaction
value has shown healthy growth of 32% during the period. In 2009-10
fiscal, payments made by debit cards in India stood at US$ 5.87
billion (Rs 264.18 billion) a rise of 44% compared on 2008-09.
Payroll cards dominate the prepaid cards market with a 34%
share, with travel cards at 24%, and multipurpose cards with a 22%
market share. Remittances and other prepaid cards are estimated to
account for 14% and 6% of the market respectively. Estimates by
ICICI suggest the prepaid cards market is expected to grow by
almost 75% in 2010 year-on-year, rising from $2.9 billion to $5
billion.
Axis Bank is the domestic leader in prepaid cards, with a 39%
market share of followed by Itz cash cards at 22% and ICICI bank at
16%. Other players include SBI, HDFC Bank and Punjab National Bank.
In the multipurpose cards market, Itz Cash Card Limited is the
leading player. It is the largest firm in the non-banked category
for prepaid cards. As for the number of debit cards issued, SBI
dominates with a 37% share followed by ICICI bank at 11%.
Factors influencing the growth of the
industry
Important features driving the debit/prepaid card industry
include the confident growth trajectory of the Indian economy, the
availability of a payment infrastructure embracing both private and
public sector banks, and increased penetration of
mobile telephony. India’s economic expansion remains the
catalyst for a dramatic change among the country’s consumers. GDP
growth has averaged around 7% since 1997 and India was able to keep
its economy growing at a credible rate even during the 2008-2009
slump, managing +5.4% in 2009. This broad based growth is creating
a potent middle class, primarily urban based, who are leading the
spending and usage of plastic cards. While there is no official
definition of how to classify the middle class in India, consensus
seems to have settled on a figure of c-200-300 million people. Even
using the most aggressive estimates of its size, the middle class
comprises less than 30 percent of the population. With sufficient
disposable income to spend on goods and services, the middle class
is an attractive target for prepaid cards.
According to a recent study if India is able to maintain its
current growth trajectory, average household incomes will triple
over the next two decades and it will become the world’s
5th-largest consumer economy by 2025, up from 12th now. Private
consumption plays a much larger role in India’s growth than it has
in that of other developing countries. In 2005, private spending
reached about 17 trillion Indian rupees ($372 billion), accounting
for more than 60 percent of India’s GDP.
As for payment infrastructure, most Indian banks have been
widening their networks of automated teller machines (ATMs) in
order to expand their business. Banks have also been installing
increasing numbers of point of sale (POS) terminals (electronic
data-capture swipe machines for accepting debit and credit card
payments) at retailers. As of 2010, there are 40,000 ATMs and
450,000 POS terminals in India. A majority (more than 70%) of these
ATMs and POS terminals are located in cities with the rest in small
towns and villages. The key cities which lead in number of
ATMs include Mumbai, Delhi, Kolkata, Bangalore, Chennai, Ahmadabad,
Hyderabad, Pune, Kanpur, Surat, Jaipur and Lucknow.
Another important infrastructure requirement for the development of
banking services and prepaid cards business is a credible telecom
network. India has been investing heavily in its telecom
infrastructure. It is the world's fastest growing
telecommunications market (CAGR of 52%), with 671.69 million
telephones. Close to 95% of all phones in India are mobile
phones, with a penetration rate close to 57%.
Potential for expansion in rural areas
As telephone ownership in urban areas matures, rural areas are
taking the lead in adding new phones. Rural areas added an average
of 8.76 million phones monthly during December 2009 to March 2010.
By July 2010, the number of mobile phones in rural India had
reached 236 million. This number is markedly higher than the
187 million adult population living in rural India with bank
accounts. In short there are a significant number of people with
mobile phones but without bank accounts in rural India. This gap
will only increase as millions of mobile phones are added monthly
in rural India.
This is an attractive back-drop for starting mobile banking
services in rural India. ‘Mobile wallets’ would bring low-cost
banking & remittance services to millions, for whom banking
services are not readily available or easily accessible. The
attraction is that the mobile telephony infrastructure is well
developed. This offers an attractive opportunity to open new
markets and business opportunities for service providers, banks,
mobile operators & merchants.
Leading domestic banks like SBI, ICICI, HDFC, AXIS and Canara
all offer mobile banking services in India. For example, iMobile, a
mobile banking application offered by ICICI Bank, assists its
customers to carry out mobile money transfers, bill payments and
check credit card balance through their mobile. This mobile
application covers savings bank, Credit Card and Loan accounts. By
using iMobile almost all internet banking transactions can be done
on mobile phones.
Introduction
Factors driving the prepaid cards Industry
Advantages & disadvantages
Types of debit/prepaid cards
Prepaid card infrastructure
Banking in
India: Introduction
Infrastructure
Influence of macroeconomics
Demographic analysis
Income
Urban/rural divide
Mobile banking and telephones
Market overview
Debit cards
Prepaid cards
Market segmentation
Debit & prepaid
cards
Prepaid cards
Competition: debit cards
Competition: prepaid cards
Competition:
financials
Axis Bank: A case study
ICICI Bank: A case study
Swot: Prepaid card industry
Profile of leading banks
Conclusions