The contemporary digitized era has welcomed the innovative ways of transactions in the market. Today’s market boasts of speed, safety and convenience. Consumers are flooded with vast array of digital payment platforms, online shopping and cashless transactions. In addition sellers too are offered the equal opportunities of handling and managing their sales (Reserve Bank of India 2016). One such unique feature of conducting digital transactions is through payment terminals.
Payment process through point of sale terminal
These transaction machines are an amalgamation of software and hardware that enables the retailers to accept payments via plastic cards without updating their cash books to verify the cards directly. They follow a sequential process where first the information of the card is read. This is followed by verifying the availability of balance available in the buyers account. The next step is transferring of the funds from buyers account to sellers account. Lastly the transaction is recorded and the receipt is printed (Technopedia 2017). Point of sale terminals have replaced the traditional cash registers and are further loaded with more useful functions such as:
- recording and tracking of customer orders,
- processing of credit cards, debit cards,
- connectivity with other network systems and
- inventory management (Rouse 2017)
Growth prospects of point of sale machines in India
With the wave of digital revolution, India no longer lags behind the trend of using these machines. Until the end of 2016 there were 1.5 million point of sale terminals in India (Jain 2016). Besides, the ongoing trend of plastic money is likely to escalate this figure by another one million in the coming one year (Jain 2016). In amid of demonetization of currency notes of 500 and 1000, India witnessed a huge demand of transforming the cash based economy into cash less. This very historical decision invigorated the need to search for alternative means of transactions. As a result, point of sale machine became a good alternative.
Major suppliers of point of sale machines in India
The biggest providers of payment terminals are two international firms namely Ingenico and VeriFone. These two firms cumulatively dominates almost eighty percent of the total market in India. After receiving the order these firms subsequently outsource the manufacturing of the machines to China.
|Major distributors of Point of sale machine in India||VeriFone||Ingenico|
|Country of origin||United States of America||France|
|Number of employees||5000||6000|
|Total revenue||$ 2 billion||$ 2.32 billion|
|Revenue share from Asia- Pacific||11.8 %||20 %|
Another prominent provider of electronic draft capture machines in India is Pine Labs which witnessed a stupendous jump in demand of its machines. The ban on specified notes and following the path of digital transactions has surmounted its growth rate from 24% to 60% in a year. They have received demands from new emergent consumers such as college canteens, whole-sellers and small traders. Even the cities with high cash transaction ratio in the past such as Beed, Bokaro, Tiruchirappalli and Sindhudurg are ordering these machines owing to new preference for card transactions (Srakar 2016).
According to the Reserve Bank of India, in 2016 the point of sale infrastructure fell short of demand as there are nearly 73 crore (730 million) debit and credit cards in India (Jain 2016). This suggests that there is huge potential market for the payment receiving machines and extensive distribution. Furthermore, the governments’ emphasis on creating less cash economy has subsequently resulted in procurement of point of sale machines by banks so as to provide card swiping terminals to traders.
Major banks taking initiatives to distribute the point of sale machines
The major public and private sector banks that cracked contracts with major manufacturers and dealers of point of sale machines such as Ingenico and Verifone are:
- State Bank of India,
- Canara Bank,
- United Bank of India,
- Bank of India,
- HDFC bank,
- ICICI bank
- Ratnakar Bank Limited and
- Axis Bank.
Besides, they have further approached the payment service provider like Atom Technologies for facilitating them with payment gateways and point of sale terminals (Bhakta 2016).
In addition an official from HDFC bank revealed that pre demonetisation the demand for point of sale machines used to be about 5000 a month. However post demonetization it has been around 5000 per day. Furthermore an executive of Axis Bank revealed that they have placed an order for 40,000 terminals. However this figure is expected to increase further and go beyond that owing to pressing demand from the merchants. He further revealed that payment terminals have an average cost of Rs 6000 to Rs 10000. This cost is generally borne by the banks especially in the case of large business volume traders.
In addition managing director of Canara Bank shared their plan of installing 25000 terminals in coming months which will serve them dual objectives. Firstly, boost their account balances and second would lead to increased customer satisfaction.The sudden demand has welcomed tremendous opportunities for companies involved in the business of purchasing and installing terminal orders for banks.
There are many banks which outsource their terminals to other companies instead of buying their own. An important player in payment terminals outsourcing business in India is Atom Techonologies. Its managing director, revealed that since November, 2016 they had received bulk orders such as 10,000 terminals from United Bank of India and 20,000 terminals from RBL Bank. In addition to this, they have already installed 27000 payment terminals for Union Bank of India. Although, big business houses, retail outlets and shopping malls are already acquainted with such payment terminals. The current burgeoning demand is mostly being felt from small towns, medium and small size businesses and grocery stores (Singh 2016).
Major payment gateways for payment terminals in India
The transaction through point of sale machines is processed with the help of a merchant service commonly referred to as payment gateways. The payment gateways allow the payments via credit card or other plastic money modes to be processed for the users such as retailers, business merchants and e-commerce traders. Major payment gateways for point of sale terminals operating in India includes:
- InstaMojo payment gateway,
- CCAvenue payment gateway,
- E- billing solutions (EBS) payment gateway,
- Atom Paynetz payment gateway service,
- Citrus payment gateway,
- DirectPay payment gateway service,
- PayUbiz payment gateway service,
- ZaakPay payment gateway and
- Emvantage payment gateway service (Chandra 2015).
Revenue from payment terminals
Furthermore, one of the key initiatives to encourage the deployment of point of sale machines by the merchants is to foster digital economy. Reserve Bank of India has rationalized merchant discount rate (MDR) for debit card transactions from September 2012. Merchant discount rate is the fees charged by the point of sale machines installer from the merchant for the use of its infrastructure. The scheme operates by offering merchant discount rate at the rate of 0.75% for transactions worth up to Rupees 2000. Furthermore 1% for transaction above Rupees 2000.
There are five stakeholders in the transaction process via point of sale machine terminals. Firstly merchant or the payment gateway hired by merchants, point of sale terminal installer, card network, customer and card issuing bank. Merchant or the payment gateway bears merchant fees and taxes. Point of sale terminal installer bears cost of capital equipment and maintenance charges. Card issuing banks bear issuance costs, replacement and maintenance charges and finally the customers bear annual card fees, convenience charges and surcharge on use of cards (Reserve Bank of India 2016).
Scope for new players in point of sale distribution system
In conclusion, the advent of less cash economy and enhanced customer sovereignty and quality experience calls for the demand of extensive distribution network of point of sale terminals. Therefore with increase in number of terminals there will be demand for number of payment gateways in the future. The untapped users vis-à-vis small merchants, tier III cities and rural areas need to be captured. So there is huge scope for new players in the point of sale distribution channel as well as in the payment gateway services.
- Bhakta, P., 2016. Banks queue up to procure point-of-sale machines. Economic Times. Available at: http://www.google.co.in/amp/m.economictimes.com/industry/banking/finance/banks-queue-up-to-procure-point-of-sale-machines/amp_articleshow/5571453.cms [Accessed March 21, 2017].
- Chandra, A., 2015. 10 Best payment gateways in India. BrandLoom. Available at: http://www.brandloom.com/10-best-payemnt-gateways-in-india [Accessed March 21, 2017].
- Jain, M., 2016. India’s hunt for point of sale machines a roadblock in China. Bloomberg. Available at: http://www.bloombergquint.com/business/2016/12/10/indias-hunt-for-ponit-of-sale-machines-hits-a-roadblock-in-china [Accessed March 21, 2017].
- Reserve Bank of India, 2016. Concept paper on card acceptance infrasructure, Mumbai. Available at: http://m.rbi.org//Scripts/PublicationreportDetails.aspx?UrlPage=&ID=840.
- Rouse, M., 2017. point-of-sale terminal (POS terminal). com. Available at: http://whatis.techtarget.com/definition/point-of-sale-terminal-POS-terminal [Accessed March 21, 2017].
- Singh, S., 2016. Demonetisation: Sharp surge in demand for card-swipe machines. The Indian Express. Available at: http://indianexpress.com/article/business/banking-and-finance/demonetisation-rs-500-re-1000-black-money-demand-for-card-swipe-machines-4381427/lite/ [Accessed March 21, 2017].
- Srakar, J., 2016. Boom time for swipe-machine makers. Times of India. Available at: http://m.timesofindia.com/business/india-business/boom-time-for-swipe-machine-makers/amp_articleshow/ [Accessed March 21, 2017].
- Technopedia, 2017. Point of Sale Terminal (POS Terminal). Technopedia. Available at: http://www.technopedia.com/definition/26649/point-of-sale-terminal-pos-terminal [Accessed March 21, 2017].