India Card Payment Report FY 12-13

India Card Payment Report FY 12-13

Contents About AtosWorldline... 2 Foreword... 4 Credit Card Issuance... 5 Debit Card Issuance... 6 POS Terminals... 6 Transactions and Spends... 8 Emerging Trends... 11 COPYRIGHT INFORMATION: All information contained in this report is the property of Atos Worldline, India. Reproduction of information, tables, charts etc. is permitted subject to the condition that the source is acknowledged as follows: Source: Atos Worldline, India Research This report can be viewed on our website: http://in.atosworldline.com/ Disclaimer: The data presented is based on feedback from relevant people in various banks and from various other sources. Atos Worldline, India makes no representation or warranty, expressed or implied, is made as to their accuracy or completeness. It has not been validated with actual records. Wherever published information was available it has been used. The analysis done is purely on the data collected and the views expressed thereof are on the basis of the analysis. In certain cases, where data was not forthcoming, best effort estimates have been used. This report is not to be relied upon in substitution for exercise of independent judgment and use of this data by any individual or entity for any of their business decisions or for any other purpose is solely at their own risk and responsibility and Atos Worldline India shall not be responsible and accepts no liability for any loss arising from the use of the information presented in this report for what so ever. 1

About Atos Worldline About Atos Atos is an international information technology services company with annual revenues of EUR 8.7 billion and 78,500 employees in 42 countries. Serving a global client base, it delivers hi-tech transactional services, consulting, systems integration and managed services. Atos is focused on business technology that powers progress and helps organizations to create their firm of the future. It is the Worldwide Information Technology Partner for the Olympic Games and is quoted on the Paris Eurolist Market. Atos operates under the brands Atos, Atos Consulting, Atos Worldline and Atos WorldGrid. Atos India over the years has become a strategic sourcing centre and is playing a pivotal role in the growth of Atos global business. Through continued commitment to improvement we have achieved various industry recognized certifications. About Atos Worldline Atos Worldline brings together Atos core expertise in Hi-Tech Transactional Services with 40 years of experience and recognized know-how in the payment industry. A leader in end-to-end services for critical electronic transactions, Atos Worldline is specialised in electronic payment services (including issuing, acquiring, terminals, and card and non-card payment solutions & processing), eservices for customers, citizens and communities (ecs) as well as services for financial markets. Atos Worldline is committed to continuous R&D and innovation so its customers can benefit from leading-edge solutions to stay ahead of market evolutions. Atos Worldline generates annual revenues of 913 million and employs over 5,400 people in the world. For more information, please visit: atosworldline.com About Atos Worldline India Founded in 1996, Atos Worldline India provides end-to-end services for critical electronic transactions in the country. It specializes in electronic payment services in India, partnering with banks, merchants and government institutions. AWL India Pioneered the concept of shared services, through the use of its infrastructure, for card and transaction services across the country and offers comprehensive acquiring and issuing related services under the Design, Build, Host and Operate model. Today, it is the largest acquiring processor in India with a 30% market share, and has a 90% share of the outsourced market. It processes over 200 Mn acquiring transactions each year worth ~INR 500 Billion and a peak volume of over 1 million transactions per day. A key strength is its pan-india reach; it 2

services over 225,000 terminals in more than 1600 cities and towns, managing terminals even in inaccessible locations. AWL is also a significant player in Card issuance in the country, with over 15 million credit, debit and prepaid cards issued and managed for various customers. It also provides business critical value added services such as Dynamic currency conversion, loyalty management and fraud & risk management to its partners. AWL has a wide range of client coverage, with over 30 contracts in the Banking and Finance space and several large contracts in the Energy & Utilities and the Retail space. Powered by a robust infrastructure with world class data centers in Mumbai and Bangalore, AWL maintains its vast communication network through 19 hub locations and is an ISO 9001:2008, ISO 27001 and a PCI DSS certified organization. People are at the core of the organization, and AWL services its customers through a unique blend of 350+ experts spanning across banking, technology and payment domains. It strives for operational and business excellence in a dynamic, growing and competitive market which is demonstrated by several awards and recognitions over the years from customers and industry organizations. For more information please visit: in.atosworldline.com 3

Foreword It is indeed a privilege to present the India Card Payment Report for FY12-13. The current financial year has been a dynamic one for payments, with a significant growth seen across the board despite a sluggish economy. On the issuance side, credit cards issuance is back to growth after a long period of decline while debit cards have continued to grow at the aggressive pace seen during the past five years. The acquiring landscape has also seen several changes this year, with a number of large banks expanding their presence in this space by leveraging into their pan India network. Electronic payments have been buoyed by emerging products such as prepaid and mobile based solutions and by changing regulations and environment. This year we present the report in a new format, covering a 5 year period from FY09-FY13 to examine how trends have evolved across the board during this period. As always, we would like to thank all those who have forwarded their valuable suggestions, comments and feedback. We look forward to your suggestions and feedback. Please mail your suggestions to us. Regards, Jean Pascal Duvet Chief Executive Officer, Atos Worldline, India 4

Credit Cards Issuance Credit Card Base (in million) 25 18 18 19 18 FY09 FY10 FY11 FY12 FY13 Estimated The credit card segment in India witnessed growth in this year after a four year period of sluggishness. Although it is still far from the peak of 2008, there has been an uptick in issuance from both private and public issuers and the base is expected to reach 19 million by the end of this financial year. Market Share by sector Foreign Bank 26% Private 56% Public Sector 18% Private sector banks remain the largest issuers, accounting for more than half of the credit card base. Foreign banks have been slower than Indian banks in issuing which has led to slight erosion in their market share over the previous year (28% in FY12). Figures as on Dec 12 Market Share by bank Axis 5% Standard Chartered 7% Citibank 13% Others 14% SBI 13% HDFC 33% ICICI 15% The bank wise market share does not see any significant changes over FY12. HDFC Bank continues to be the largest credit card issuer, accounting for a third of the existing base. Figures as on Dec 12 5

Debit Cards Issuance Debit Card Base (in million) 327 278 228 182 137 FY09 FY10 FY11 FY12 FY13 Estimated The strong growth in debit cards issuance continues with a 17% increase in FY13 estimated over FY12. The CAGR over the past five years is now at 24%. Though this growth rate will drop off due to an increasingly large base, banks have been adding between 40-50 million cards each year and this trend is likely to continue given large unbanked population. Market Share by sector Foreign 1% Private 22% Public Sector 77% Unlike their limited presence in credit cards, the Public sector banks continue to have the dominant share in debit card issuance. The shares for all sectors remain unchanged from FY12. Figures as on Dec 12 Market Share by banks Figures as on Dec 12 State Bank of India 33% Others 42% Bank of India 4% HDFC 5% Axis Bank 4% PNB 6% ICICI 6% As in past years, SBI continues to have the lions share in debit card issuance with a third of the market share. Large private and public banks follow, usually in proportion to their branch network and customer base across the country. 6

POS Terminals Terminal Base POS Terminals (in '000) 858 661 590 477 427 FY09 FY10 FY11 FY12 FY13 Estimated FY 13 has seen a strong growth in POS terminal base across banks, with an increase of 30% over FY12. This is almost double the annual growth rate that was seen in the preceding four year period form FY09- FY12. This uptrend is expected to continue due to a renewed focus on increasing the acceptance base across sectors. Market Share by sector Foreign 11% Figures as on Dec 12 Private Sector 83% Public Sector 6% Private Sector continue to have the dominant market share as in previous years. However, the current year has seen some large Public Sector have become active in increasing the acceptance base by leveraging their reach and network. The market share of the Public Sector may thus grow in the coming years. Market Share by banks State Bank of India 4% Figures as on Dec 12 IDBI 2% Other 14% ICICI 24% Axis 27% HDFC 29% The three large players Axis, HDFC and ICICI continue to be the leaders in terminal deployment. The most notable mover is SBI, which has moved from a minor player to the fourth largest in this metric. This again highlights the latent potential of the PSU banks in terms of market share expansion. 7

Transactions and Spends Total Card Base Card Base (in million) Credit Cards Debit Cards 327 278 137 182 228 25 18 18 18 19 FY09 FY10 FY11 FY12 FY13 Estimated A combined look at the issuance base highlights the obvious potential of debit cards, that now account for over 94% of the total cards issued in India. This vast latent potential in debit cards makes it the most important segment going forward. Transactions Transactions (in million) 466 128 170 237 328 260 234 265 322 396 FY09 FY10 FY11 FY12 FY13 Estimated Credit Cards Debit Cards The strong growth in transaction volumes has continued this year with a 33% increase over FY12 (42% growth in debit card transactions and a 23% growth in credit card transactions over FY12). Since the decline in FY10, credit card transactions have grown at a CAGR of 19%. With the increase in issuance expected to continue, a higher growth in spends and volumes is likely next year. Debit card transactions have grown at a CAGR of 38% in the five year period from FY09-13. The increase in base, favourable regulatory moves 8

and a growing consumer acceptance to use debit cards for direct purchases point towards a continued growth. The faster growth has resulted in debit card transactions overtaking the credit card transactions significantly in FY13. Debit card transactions in FY13 are estimated to account for 54% of the overall transactions, up from 33% in FY09. The per card activity in credit cards has increased substantially to over 21 transactions per card per year, a CAGR of 18% over the figure of 11 in FY09. Per card activity in debit cards has increased at a slower pace at 11% since 2009, indicating that most of the growth in transactions and spends is fuelled by the increase in card base. Spends Spends (in billion) Credit Cards Debit Cards 185 264 387 654 629 755 534 978 726 1,235 FY09 FY10 FY11 FY12 FY13 Estimated Overall card spends are estimated to grow at a substantial 30% in FY13 over the previous year (FY12). This is significantly higher than the average growth rate in spends of 23% over the five year period from FY09-13. Since FY09, credit card spends have now grown at CAGR of 17% (28% in the period FY11-13), while the debit card spends have grown at a CAGR of 41% in the same period. Despite the large growth in transactions, the average ticket size per transaction for credit cards has grown at a CAGR of 6% (Average ticket size for FY13 is ~3,100). For debit cards this figure is nominal, indicating that spends have grown in proportion with transactions and card base. (Average ticket size for FY13 is ~1,600) 9

Spends by category (on POS) Others 26% Source : AWL Estimates Restaurants 4% Hospital 7% Supermarkets 9% Retail Fashion 32% Hotels 13% Departmental Stores 9% Share of spends on POS across different categories remains largely unchanged. Retail Fashion (which comprises of Apparel, Jewellery etc.) continues to have the largest share. Hotels and Restaurants together account for 17% of the total spends on POS. Departmental Stores, Supermarkets and Hotels are the other significant categories. 10

Emerging Trends Low cost mobile based POS 2012 saw the introduction of a new mobile based POS service. The service includes a card reader device which is attached to a mobile phone/tablet and enables the mobile device to function as a POS terminal. After the transaction completion, customer signature is captured on the mobile device (touchscreen), while the customer is sent a receipt of the transaction via SMS or Email. The mobile based solution has already seen some success in insurance and has the potential to expand acquiring to other new categories, such as home delivery which require payment on the go. This channel reduces the capex requirements for banks and companies thus enabling them to offer acquiring to a much larger base of merchants. Prepaid Instruments A range of prepaid instruments were launched this year, with form factors ranging from mobile to cards. While a clear winner is yet to emerge, the month on month growth has been substantial. The monthly average transaction volume has grown by over 140% over last year and commerce has grown by ~60%. Both M-wallet and the physical cards have contributed to this growth. Prepaid as a landscape is still emerging and with banks and telecom providers both pushing different instruments, this evolving segment is likely to see growth similar to FY13 in the future as the base is still small. Mobile Banking Similar to Prepaid Instruments, Mobile Banking has seen a robust growth in the first nine months of FY 13. As per the recent RBI figures for December 12, the monthly average transaction volume has grown by over 60% over April 12, and transaction value over the same period has grown by over 155%. A gradual change in customer behaviour, along with maturing processes and security features should push this growth trend further. NPCI and Rupay The evolution of National Payments Corporation of India (NPCI) and Rupay continues to be something that the industry is keeping a keen eye on. The new debit card interchange rules already have had a positive impact on the usage of debit cards, and a strong and wide-spread Rupay issuance and acceptance environment will help realize the dormant potential of the debit card base. 11

Fraud and Risk Management There has been a significant rise in the number of fraud incidents in banking and card payments in the last one year, and the trend is expected to continue in the future. This presents a huge challenge for banks, with a direct impact on their bottom line. With increased regulatory scrutiny and guidelines by RBI to control fraud, banks are under pressure to implement best practices and technology to have an efficient fraud and risk management framework. Atos Worldline India launched its online near real time fraud and risk management services in 2012, which help banks effectively, monitor and control card payment related fraud. Compliance and PCI There have also been several reported cases of PCI (Payment Card Industry) standard breaches in last 6 months, at global banks and merchants. Compliance with PCI standards is essential to ensure security in card payment transactions and compliance increases trust in end users. Any Non-compliance poses a risk to the bank s and merchant s brand. PCI certification is also required with DR site. Atos Worldine helps its banks and merchants adhere to these standards by providing services such as PCI certification at DR site and a tokenization solution to decrease the PCI effort for the merchant. 12

For more details contact: Prateek Sanghi DGM, Business and Strategy Development ATOS WORLDLINE INDIA PVT. LTD. 701, INTERFACE 11, MALAD WEST, MUMBAI 400 064, INDIA Tel: + 91 (22) 4042 4000 Fax: + 91 (22) 4042 4400 Website: in.atosworldline.com Email: prateek.sanghi@atos.net awl-in.communications@atos.net 13