Card payment push may bleed banks by Rs 3,800 crore annually

After the note-ban last November, the Centre pushed banks into deploying millions of points-of-sale (PoS) machines to encourage online payments. Since then, banks have more than doubled their PoS terminals. The number of PoS terminals post-demonetisation has increased from 13.8 lakh in March 2016 to 28.4 lakh as of July 2017. On an average, banks are installing 5,000 PoS per day. This has resulted in increase in debit plus credit cards transactions at PoS from Rs 51,900 crore in October 2016 to Rs 68,500 crore in July 2017, with peak reaching in December 2016 to Rs 89,200 crore. 

“We estimate that for OFF-US transactions, the aggregate annual loss for card transactions at PoS terminals around is Rs 4,700 crore. However, the net revenue gain per annum from ON-US transactions at PoS would be around Rs 900 cr only. “So, the total annual loss to the banking industry is around Rs 3,800 cr,” SBI Research said. The payment card industry is based on a 4-party model - the issuing bank, acquiring bank, merchant and the customer. 

The transactions at PoS are termed as ON-US transactions if the issuing bank and acquiring bank are the same bank. If the issuing bank and acquiring bank are different entities, then it is known as OFF-US transactions.