What’s holding back card usage in India?

This piece originally appeared on Livemint.com

 

Among the debates that demonetisation has kicked off is whether India is ready to go cashless. Some argue that Indians’ preference for cash has to do with their mindset, and that it will take time to change, irrespective of the options one may have. Others say that it has more to do with the infrastructure and that the country simply doesn’t have the capacity to significantly increase the share of digital payments. The data on point of sale (PoS) terminal transactions from the pre-demonetisation years suggests that the problem is the latter.

While the number of transactions on PoS terminals has been going up over the years (chart 1), the number of number of devices has not gone up in tandem(chart 2).

 

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card2

 

It’s not that India already has enough. There is a shortfall of PoS terminals compared to other countries, measured against the number of people and the number of debit cards in the country (chart 3). These suggest that more terminals would mean more transactions.

 

card3

 

Also, while big banks have been active in pushing PoS terminals, the smaller banks can step on the gas. The top five banks’ share in the ATM network is less than 50%. However, they control 80% of PoS terminals (chart 4).

 

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News in Numbers, Oct 20, 2016: Safety PIN…

In the recent days, some banks have been sending out instructions to some of their customers asking them to change their personal identification number (PIN) or even blocking some debit cards to issue replacements. There have been disturbing news reports that talk about certain debit cards having been compromised with. With more and more Indians (though 78% of all consumer payments were made by cash last year) opting to go for digital modes of payment (what with the rapid growth in the usage of smartphones), nearly $500 billion worth of transactions in the country would happen digitally by 2020 (that is, 10 times the current levels), as per a report. In a bid to become cashless, we shouldn’t forget that there need to be robust systems to prevent such breaches and ensure protection to consumers from possible digital frauds.

Here are a couple of articles that talk about how to deal with online bank and ATM card frauds.

 

32 lakh

What is it? The number of debit cards that are reportedly compromised (unauthorised access to financial details of the card enabling stealing of funds).

Why is it important? It could turn out to be one of the biggest financial breaches in Indian banking history. The worst-hit banks are said to be: the State Bank of India (SBI), HDFC Bank, ICICI Bank, Axis Bank and Yes Bank. Of the total, 26 lakh are reportedly on the Visa and Mastercard platforms with the rest on RuPay. The Reserve Bank of India is said to have asked banks to replace debit cards whose security is suspected to have been compromised and this number is put at 17.5 lakh, according to another report.

Tell me more: SBI, India’s largest lender, has blocked the debit cards of 6 lakh customers and started the process of replacing them. As of July 2016, the total debit card base in India was 69.7 crore.

 

3

What is it? The number of hospitals in Odisha that have fire safety clearance, of the total of 568.

Why is it important? Highlights the blatant violation of fire safety norms by the healthcare system in Odisha and the need for better enforcement of rules by the authorities. The National Human Rights Commission (NHRC), which brought out this fact, has issued a noticeto the state government after a fire accident killed 21 people at Sum Hospital in Bhubaneshwar on Monday evening. The Union Health Minister JP Nadda has said new guidelines will be issued to all states to ensure hospitals are fire-compliant.

Tell me more: The NHRC has called on the government to file a report in six weeks, asking it to mention the measures it has taken or proposes to take to prevent such mishaps in the future and also, the relief and rehabilitation given to the relatives of those who died or were injured in the accident.

 

4

What is it? The number of serotypes or strains of dengue virus that can be potentially targeted by a vaccine candidate, which is under development by the International Centre for Genetic Engineering and Biotechnology in collaboration with Sun Pharma.

Why is it important? This is reportedly the first indigenous dengue vaccine candidate to be developed that could provide protection against all the four strains of the virus. Currently, there is no vaccine (except for one) or any particular medicine to treat dengue, according to the World Health Organization (WHO). As many as 51,731 cases of dengue and 93 dengue-related deaths have been reported in India so far this year. However, this potential vaccine has passed only the pre-clinical stages and it could take some time before it hits the markets.

Tell me more: The WHO approved the world’s first vaccine for dengue fever called Dengvaxia developed by Sanofi Pasteur in April this year though a high-level (Indian) government committee held back approvals citing the need for additional clinical trial data.

 

35 million

What is it? The number of smartphones shipped during the July-September quarter, according to Counterpoint Research.

Why is it important? This is a new record for the Indian market – smartphone shipments grew 25% on a year-on-year basis and 21% sequentially. Interestingly, Chinese vendors such as Lenovo, Xiaomi, Vivo and Oppo now command nearly a third of the Indian smartphone market (32%, up from 27% in the previous quarter), eating into the market share of top players such as Samsung, Micromax and Intex. Though Samsung and Micromax are still the top two players (in that order), their market share fell to 21.6% (from 25.6% in the June quarter) and 9.8% (from 14.1%) in the September quarter respectively.

Tell me more: Lenovo regained the third position while Reliance Industries’ smartphone brand Lyf moved up a position to become the fourth largest brand. Intex slipped from the third position to the fifth.

 

150

What is it? The number of entities that have been banned by the Securities and Exchange Board of India (SEBI) after getting the authority to regulate collective investment schemes (CIS) in 2013.

Why is it important? Though the market regulator had asked these firms to discontinue their schemes, repay investors in three months and file a winding-up report, none of them have done so. Highlights the difficulty in regulating such entities and the need for a better mechanism to refund investors who’ve fallen prey to Ponzi schemes. For instance, PACL Ltd, which owes Rs 49,100 crore to 5.8 crore investors, has not complied with the CIS rules and is yet to refund its investors.

Tell me more: SEBI has filed 567 prosecution cases against those collecting public money through illegal investment schemes, as on July 31.

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News in numbers, Apr 20, 2016: Maggi noodles’ comeback, cash still preferred payment mode…

51%

What is it? The market share Maggi noodles has in the Rs 2,000-crore noodles market, according to Nestle India quoting Nielsen.

Why is it important? The popular snack, which was relaunched in November after a five-month ban, is yet to gain the commanding position it had before the ban – an 80.2% market share in the January-March quarter of 2015. The ban came after the food regulator found excess lead in its sample packets, which caused its net profit to shrink by over half to Rs 532 crore in the calendar year of 2015.

Tell me more: With two variants in the market, Nestle India would soon relaunch two more: atta and oats noodles. Before the ban, the market of instant noodles was estimated to be Rs 3,800 crore.

 

10%

What is it? The percentage of stake Housing Development Finance Corp. (HDFC) has agreed to sell in its insurance unit, HDFC Standard Life, to the public.

Why is it important? This will make the company the first life insurer in India to go for an initial public offering (IPO) and could set a precedent for other insurers.

Tell me more: The divestment plan is likely to roll out in the second half of 2015. HDFC Standard Life, a joint venture between HDFC and UK-based financial services provider Standard Life, recently saw the latter increasing its stake in the company by 9% to 35% for Rs 1,705 crore. This valued the company at Rs 18,951.4 crore.

 

6.7

What is it? The number of card transactions per person per year in India.

Why is it important? This is among the lowest in the world, reflecting the fact that cash is still the most preferred mode of payment in the country. The number compares poorly with other major economies: Australia (249.3), Canada (247.9), Korea (260.8), United Kingdom (201.7), Brazil (54.8) and China (14.4).

Tell me more: Another data point that highlights this is: usage of debit cards at ATMs account for 88% of volume and around 94% of the total value of debit card transactions while the corresponding figures for point of sale terminals are 12% and 6% respectively.

 

33 crore

What is it? The number of people affected by drought in 10 states in India, according to the Indian government.

Why is it important? The country is staring at one of the worst water crises in the recent past, with over a quarter of India’s population facing water shortage and agricultural distress. The government said it would launch large-scale water conservation and storage measures under MGNREGA, the rural employment scheme. The weather department’s forecast of an above normal rainfall this year is likely to bring some respite.

Tell me more: Uttar Pradesh is the worst-affected state accounting for nearly a third of the drought-affected people. The Indian government has disbursed Rs 19,551 crore this month under the rural employment guarantee scheme, which is half of the government’s annual budgetary allocation.

 

7,500

What is it? The number of small cases relating to service tax and customs – involving amounts less than Rs 15 lakh – that are being withdrawn by tax authorities from tribunals and High Courts.

Why is it important? This is likely to reduce the burden of pending cases on tribunals and courts. This move is also aimed at making the tax regime non-adversarial and to focus on cases based on merit alone and not on meeting collection targets.

Tell me more: Last December, the Finance Ministry had increased the threshold limit for filing appeals before the Customs Excise & Service Tax Appellate Tribunal and High Courts to Rs 10 lakh and Rs 15 lakh respectively.

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