Economics of POS Vs ATM in India for Banks

June 10, 2017 · Author: · Category: bank 

India is still under-invested in both ATMs and POS [Credit Card Point of Sale systems]. The ATM industry, in their view, has enormous potential to grow in the medium term. This is evidenced even in countries where digital payment has shown higher acceptance rates. We have the debit card/ATM card population currently.

The economics of POS business favors issuing banks as compared to acquisition (Customer) banks. This is primarily because most of the MDR [Merchant Discount Rate] fees are taken by the issuing bank which results in a skewed investment scenario.

For example, the competition’s response to ATM once debit card was freed was quite positive as the interchange fees allow banks to use ATM as a source of revenue. Banks started putting infrastructure as it allowed them to earn fees (net) while issuing banks that were not keen to put infrastructure were content in paying them as it did not justify investments for their scale of operations. However, on POS, it does appear that the competitive environment is not suiting large scale deployment on a relative basis. Unless we see one large player investing heavily in building the infrastructure, it is hard to understand the investments on the acquisition side of the business.

The customer is less concerned with the acquisition side of the business as the relationship the person has is with the retailer and not the payment mode. However, we are seeing a lot of different payment methodologies which makes it a challenge to understand the best possible adoption technology. Different payment mechanisms have different risks and costs.


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