Industry Survey Report 2005

8/6/2019 Industry Survey Report 2005

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Research

INDUSTRY SURVEY

PAYMENT CARD INDUSTRY 2005


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Abbreviations

Foreword

1. Credit Cards.. 1

2. Debit Cards... 5

3. ATMs 8

4. Merchant Establishments..... 10

5. Key Trends... 11

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Reproduction of information, tables, charts etc is permitted subject to the condition that the source is acknowledged as follows: "Source: Venture Infotek Research

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The data presented is based on feedback from relevant people in various banks. It has not been validated with actual records. Wherever published information was available it has been used. The views expressed by the bankers might be their own and may be coinciding with that of the Bank. The analysis done is purely on the data collected and the viewsexpressed thereof are on the basis of the analysis. In certain cases, where data was not forthcoming, best effort estimates have been used.

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TABLE OF CONTENTS


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Abbreviations Banks

SBI-GE State Bank of India - General Electric Ltd

J&K Bank Jammu & Kashmir Bank

PNB Punjab National Bank

StanChart Standard Chartered Bank

Bank of Baroda BOB

Andhra Andhra Bank

SBI State Bank of India

CBI Central Bank of India

BOI Bank of India

NOTE: Conversion rate has been uniformly taken at 45 INR = 1 USD10 lakh = 1 million10 million = 1 crore

ABBREVATIONS


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It is with great pleasure we present the5th Annual Payment Card IndustrySurvey 2005. It has been our continuous endeavor to map the

payment space in the country and tounfold the trends as they happen.We wish to thank all those who have provided their valuable suggestions, comments and feedback on thesurvey and we certainly will strive to maintain thehigh quality of our survey year on year.

The industry has been clocking an impressive growthrate of 40% year on year, and the year 2004-05 has

been no exception.The total no. of credit cards as on March 05, 2005were 141 lakh (40% growth year on year) and debitcards were over 340 lakh (91% growth year on year).The year had 5 players in the Payment Card industry

crossing the critical 10 lakh credit cards level. All thisclearly indicates that there is more in the offing andthat the excitement has just begun.

The year also saw a slew of launches in the premiumsegment with host of other privileges associated withthe card apart from the convenience of mere payment.The Indian consumer is clearly the beneficiary andcontinues to seek more value for money in the

payment space.

The card acceptance infrastructure also has beengrowing at brisk pace. The country now boasts of over 1.9 lakh merchant establishments thus growingthe acceptance base far beyond the traditionalmerchants and cities.

We expect the growth to continue at a brisk pacein terminalizing merchant outlets.

About Us:

Venture Infotek is India'sonly consumer payment processing company, providingintegrated end to end card business consultancy and

payment processing solutions for both issuing andacquiring banks.

The organization has set up a countrywide infrastructurefor electronic payment processing with its hub inMumbai catering to over 370 cities and towns.

It has built the Indian card processing industry and todaycommands an impressive 33% share of the market. Since1997, the company has successfully devoted its foundingyears in building this massive and largely scalableinfrastructure for enabling electronic payments in thecountry, developing the industry to its present status.

We would like to thank Ms Bhoomika Koli, Summer Trainee, Mr. Nitin Walekar, Assistant Manager, Mr. PRavindra, General Manager and Mr. Sagar Narsian, Sr.Vice President, Venture Infotek for their invaluableeffort in producing this report.

We look forward to your suggestions and feedback.P l e a s e m a i l y o u r s u g g e s t i o n s t o

Regards

Piyush KhaitanManaging Director Venture Infotek Global Private Limited.

(www.ventureinfotek.com)

[email protected]

FOREWORD


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Growth of Credit Cards issued

37.34 48.65

60.6876.08

100.65

141.05

208.53

0

50

100

150

200

250

31/03/00 31/03/01 31/03/02 31/03/03 31/03/04 31/03/05 31/03/06(e)

Year

N

o .

o f C a r d s ( i n L a c s )

Segment Performance

Credit cards have been in India for well over two decades. Over the last five years though, they haveliterally taken over the market. The credit card segment has registered an impressive growth rate of around 40 per cent this year.

The credit card subscriber base - over 141 lakh - itself has grown at a phenomenal rate of 30-35 percenta year over the last few years. The rapid growth in the subscriber base can be attributed to theaggressive issuance of credit cards by top 5 players in the industry. The industry has seen the private

sector player, ICICI Bank, surge aggressively ahead, surpassing the established MNC banks likeCitibank and Standard Chartered. Now there are 5 banks with a portfolio of over 10 lakh credit cardseach.

1|Payment Card Industry 2005

Chart 1: Credit Cards Issued

1CREDIT CARDS


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Market Share

ICICI Bank emerged as the leader in the credit cardissuance category for the year, with its continuedaggressive strategy, registering a 62 percent growth rate.ICICI Bank crossed the 36 lakh mark in terms of creditcards, galloping ahead (within four years of its launch) of

pioneer Citibank (27 lakh cards), the global leader incredit cards.

ICICI Bank holds 27% market share followed byCitibank with 19% market share. SBI-GE occupies thethird slot with 14 % market share.Estimates for the year 2005-06 indicate a similar surgeand aggressiveness. The credit card numbers are expectedto cross 208 lakh by March 2006.

For the year 2004-05, no new bank forayed in credit cardmarket. However some of the key banks like UTI Bank,J&K Bank, Union Bank of India, PNB etc. announcedtheir decision to launch their cards in the year 2005-06.


Chart 2: Comparative Market Share of Individual Players

Table 1: Market Share of Individual Players (number of cards in lakh)

Rank No. Of Cards Rank

No. Of Cards Rank

No. Of Cards

ICICI 2 22.64 1 36.71 1 60.00Citibank 1 24.50 2 27.00 2 31.00SBI 4 13.50 3 19.75 3 30.75

StanChart 3 15.50 4 19.00 5 23.75HDFC 6 5.30 5 12.62 4 26.00HSBC 5 7.50 6 9.00 6 10.80ABN AMRO 7 5.00 7 7.00 7 10.00BOB 12 1.00 8 3.50 8 6.50Andhra 9 1.05 9 1.55 9 2.25Vijaya Bank 8 1.19 10 1.27 10 1.68Canara 9 1.05 11 1.07 13 1.10CBI 9 1.05 12 1.05 11 1.50BOI 13 0.80 13 0.89 12 1.20Syndicate 14 0.40 14 0.47 14 1.00Others 0.17 0.17 1.00

Total 100.65 141.05 208.53

Bank 31/03/2004 31/03/2005 31/03/2006(e)


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Sector wise Breakup

The Private Sector Banks exhibited a phenomenal growth in thecredit card market with card issuance vaulting by 77% and thecard base rising from 27.94 lakh to 49.33 lakh. Public Sector Banks have followed with a 47% increase in the base, rising from20.21 lakh to 29.72 lakh. The MNC banks have shown the leastgrowth of 18%, rising from 52.50 lakh to 62.00 lakh cards.

From the chart no. 3 it is clear that MNC Banks are still the overallleaders but their market share has fallen by 8% this year. MNCBanks account for about 44% of credit card industry in India. Inthe Private Sector, ICICI Bank and HDFC Bank are the two

prominent players, who together hold 28% of the market.Speeding up the growth at more than 77%, PSBs have grown their market share to 21% from the previous year's 20%. SBI is themajor player amongst the Public Sector Banks.

Chart 3: Analysis in terms of MNC, Privateand Public Sector Players

Sectorwise Breakup as on 31/03/05

44%

21%

35%

MNC Banks PSBs Pvt. Banks

Sectorwise Breakup as on 31/03/04

52%

20%

28%

MNC Banks PSBs Pvt. Banks


B ank 31 /0 3 /2 004 31 /03 /2005 31 /0 3 /2 006 (e)MNC Bank sCitibank 24.50 27.00 31.00Stan Ch art 15.50 19.00 23.75HSBC 7.50 9.00 10.80A BN A M RO 5.00 7.00 10.00Total 52 .5 0 6 2 .00 7 5 .55

Private S ector Banks

ICICI 22.64 36.71 60.00HDFC 5.30 12.62 26.00Total 27 .9 4 4 9 .33 8 6 .00

Public S ector BanksSBI 13.50 19.75 30.75BOB 1.00 3.50 6.50BOI 0.80 0.89 1.20Vijay a Bank 1.19 1.27 1.68A nd hra 1.05 1.55 2.25Can ara 1.05 1.07 1.10CBI 1.05 1.05 1.50

Syn d icate 0.40 0.47 1.00Others 0.17 0.17 1.00Total 20 .2 1 2 9 .72 4 6 .98

Table 2: Analysis in terms of MNC, Private and Public Sector Players (Number of cards in lakh)

1

CONTINUED


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Industry Spend

With over 141 lakh credit cards in use in India, the pattern of usage is also undergoing a sea change. The total spends inthe payment industry for the year 2004-05 crossed Rs. 33,000 crores at the POS. This reflects a growth of 53% over the

previous year. ICICI Bank is the leader in capturing maximum spends with 32% market share, followed by Citibank at20% market share. The combined share in terms of spends of the MNC Banks is about 43%.

ICICI Bank saw its spends shoot up since 2004 end, pointing out that a combination of factors are responsible for the jump - the high spending festival season and three simultaneous promotional programmes.

India currently has over 141 lakh credit cardholders, who make purchases totaling Rs. 33,000 crores per annum.Compared to the Asian market, the card market in India is at a nascent stage. Total card spending in India is only ataround 1.22% of Asian spending.

Share in Spend for the year 31/03/05

20%12%

11%

9%

16%32%

ICICI Citibank StanChartSBI HDFC Others

Rank Amount Rank AmountICICI 1 5544.00 1 10570.00Citibank 2 5500.00 2 6750.00

StanChart 3 3208.50 3 4075.50SBI 4 2160.00 4 3811.75HDFC 6 1208.40 5 3104.52HSBC 5 1800.00 6 1800.00ABN AMRO 7 1200.00 7 1750.00Vijaya Bank 8 310.56 8 417.78Andhra 10 178.00 9 225.00Canara 9 178.50 10 224.70BOI 13 118.00 11 178.00CBI 12 143.85 12 147.00BOB 11 160.00 13 122.50Others 148.40 162.31

Total 21,858.21 33339.06

Bank 31/03/2004 31/03/2005

Chart 4: Market Share for the Spend at the POS

Table 3: Industry Spend of the Credit Cards at the POS (Amt. Rs. In Crores)

Note: Doesn't include spend on American Express Cards.


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Segment Performance

Debit cards are the faster growing card-based payment segment in India, given the credit-averse nature of manyconsumers. Debit cards made their entry in India late 1998. Due to the nature of the product (buy now, pay now), it hasexperienced exponential growth. Today around 70% of the payment cards in India are debit cards, having increasedfrom 2% in 1998. There are now over 340 lakh debit cards in circulation. Debit card base in March 2006 is estimated tocross the 500 lakh mark.

Market Share

The leader in the card issuance category for the year is SBI, continuing its aggressive growth strategy. It is the singlelargest player in the Public Sector responsible for the increase in Debit Cards, which started issuing debit cards at thestart of 2003 and has now reached the card base of 124 lakh. ICICI Bank is the largest issuer of debit cards in the PrivateSector Banks at 70 lakh cards followed by HDFC.

Along with the Private and Foreign Banks, many Public Sector Banks have also entered the debit card segment leadingto increase in acceptance and the total base of cards in the market. In case of debit cards, all banks, especially the PublicSector Banks, have been replacing their ATM cards with debit cards with added functionality for point-of-sale usage.Over the next 1-2 years, it is expected

Chart 5: Growth of Debit Cards Issued


Growth of Debit Cards issue d

537.72

348.61

181.34

83.84

31.76.73

0

100

200

300

400

500

600

31/03/01 31/03/02 31/03/03 31/03/04 31/03/05 31/03/06(e)

Year

N o .

o f C a r d s ( i n L a c s )

2

DEBIT CARDS


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that all ATM cards will be converted into debit cards. Vijaya Bank, Yes Bank, Union Bank of India are some of the players to join the debit card race this year.

The debit card base today is more than double of the credit card base. This spectacular growth is expected to continuein the future, as all saving-account holders of the bank automatically qualify for debit cards, and this card usuallycomes free of cost with the savings or current account. Also, as Public sector bank start converting most of their

branches on centralized core banking system, the number of debit cards will swell.


Rank No. Of Cards

Rank No. Of Cards Rank No. Of Cards

SBI 2 43.40 1 124.30 1 184.30ICICI 1 50.00 2 70.00 2 90.00HDFC 3 21.00 3 31.50 3 47.25UTI 4 17.50 4 30.40 4 45.00Citibank 5 10.50 5 12.60 6 15.20Canara 11 3.00 6 8.50 5 25.00IDBI 7 4.00 7 8.50 7 12.00Andhra 9 3.21 8 7.61 7 12.00StanChart 6 5.07 9 6.50 12 9.00Bank of Punjab 17 1.50 10 6.25 11 9.38PNB 16 2.00 11 6.00 10 10.00Syndicate 10 3.18 12 5.86 12 9.00BOI 18 0.68 13 5.50 7 12.00Centurion 8 3.50 14 4.50 17 11.00Federal Bank 15 2.08 15 4.48 14 7.50ABN Amro 11 3.00 16 3.90 16 5.00BOB 11 3.00 17 3.50 15 6.00HSBC 14 2.50 18 3.25 18 4.25Others 2.22 5.46 23.84Total 181.34 348.61 537.72

Bank 31/03/2004 31/03/2005 31/03/2006 (e)

Table 4: Market Share of Individual Players (number of cards in lacs)


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As can be seen from the charts, the leader in themarket is SBI commanding 36% market sharecompared to 24% in the previous year, followedclosely by ICICI Bank with 20%, thereafter followed by HDFC Bank holding a market share of 9%.

Also, it has been observed that debit cards alsoenabled credit card growth. When cardholders

become comfortable using electronic paymentsthrough debit cards, they start converting to creditcards too.

Chart 6: Comparative Market Share of IndividualPlayers 2

CONTINUED


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3


Chart 7: Growth in the number of ATM Outlets

Segment Performance

Owing to the entry of aggressive Private Sector Banks, ATMs have mushroomed all over the urban Indian landscape.Subsequently, even PSU banks have followed suit with increasing number of ATMs. ATMs have grown in the last fiveyears from 1,100 ATMs concentrated mainly in the metros to an about 16,000 across the country by March 2005. Theyare estimated to cross the mark 24,000 by March 2006.

Taking the banking industry, for instance, at the moment, there are about 70,000 bank branches dotting the country. Bycontrast, there are only about 16,000 ATMs. Five years from now bankers reckon that there will be roughly three ATMsfor every one branch, which may result into around 70,000 bank branches and over 2,00,000 ATMs by 2010.

Market Share

The top three ATM deployers comprising of SBI, ICICI Bank and UTI Bank account for more than 60% of country'stotal ATM pool. SBI has the largest network of ATM outlets with approximately 5,200 outlets followed by ICICI Bank with 3,000 outlets and UTI Bank with 1,600 outlets. To increase ATM usage among the Indian population, banks aregetting into mutual agreements for sharing ATM network amongst them.

ATMs


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Market Share for ATM Outl ets(2004-05)

3 3%

20 %10 %7%

4 %

3 %

2%

2 %

2 %

17 %

SBI ICICI UTI HDFCCanara PNB Citibank AndhraUBI Others


Rank No. of

OutletsRank

No. of Outlets

Rank No. of

Outlets

SBI 1 3,800 1 5217 1 7217ICICI 2 1,500 2 3000 2 5000UTI 3 1,244 3 1599 3 2000HDFC 4 910 4 1150 4 1400Canara 5 504 5 710 5 1000PNB 6 400 6 550 7 700Citibank 7 350 7 390 11 450Andhra 8 340 8 380 12 425Union Bank of India 13 180 9 370 8 600IDBI 9 300 10 335 9 525Federal Bank 10 200

11 27816 300

BOI 10 200 12 263 15 325Syndicate 17 144 13 243 10 500HSBC 12 185 14 212 19 245Dena Bank 20 113 15 200 16 300IndusInd 16 145 16 195 13 400StanChart 19 120 17 165 16 300BOB 14 170 18 156 6 856Bank of Punjab 18 129 19 155 20 187Centurion 15 148 20 151 13 400Others 252 356 1,055Total 11334 16075 24185

B ank 31/03/2004 31/03/2005 31/03/2006 (e )

Table 5: Market Share of Individual Players

Market Share for ATM Outl ets(2003-04)

33%

13%11%8%4%

4%

3%

3%

3%18%

SBI ICICI UTI HDF CCanara PNB Citibank AndhraIDBI Others

Chart 8: Market Share of Individual Players


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Today, there are more than 1.9 lakh terminalised merchants, in 150 cities and towns across India that accept paymentcards as compared to 0.70 lakh terminalised merchants in 1999-00. ICICI Bank has acquired the largest number of merchant establishments, but is closely followed by HDFC Bank.

Although a vast majority of merchants around the country remain cash-based, there is a clear trend that more and moremerchants are accepting cards for payment not only in main metros, but in Tier | and || towns and cities. Today, 150towns and cities accept payment cards, compared to acceptance only in the major towns and cities 4 years ago.

Also, the entry of local terminal manufacturers now in the market has enabled the deployment rate to accelerate.


Chart 9: Bank wise Growth of Merchant Establishments

Table 6: Market Share of Individual Players

Merchant Establishm ents (2004-06)

0100002000030000400005000060000700008000090000

100000110000

I C I C I

H D F C

C i t i b a

n k B O B

U T I

B a n ko

fP u n

j a b H S

B C I D B I

A n d h

r a C a

n a r a

B O I

S t a n C

h a r t

C B I

V i j a y

aB a n k

T h eJ&

K B a n k

31/03/2004

31/03/2005

31/03/2006(e)

ICICI 1 30,000 1 48,000 1 1,00,000HDFC 3 26,400 2 42,000 2 60,000Citibank 2 29,000 3 29,000 4 29,000BOB 4 14,300 4 25,000 3 30,000UTI 12 1,200 5 12,000 5 25,000Bank of Punjab 7 3,800 6 10,000 6 20,000HSBC 5 5,000 7 8,000 7 12,000IDBI 6 4,000 8 6,500 8 10,000Andhra 9 2,892 9 2,828 9 4,000Canara 8 3,050 10 2,350 10 2,450BOI 10 1,900 11 1,600 12 1,800StanChart 11 1,650 12 1,450 13 1,700CBI 14 1,164 13 986 NEVijaya Bank 13 1,166 14 983 11 2,010J & K Bank 15 0 15 89 14 1,000Total 1,25,522 1,90,786 2,98,960

Bank

31/03/2004 31/03/2005 31/03/2006(e)

Rank No. Of

TerminalsRank

No. Of Terminals

Rank No. Of

Terminals

4

MERCHANT ESTABLISHMENTS


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5 Intensifying Competition

More and More Banks will enter the payment card space especially in the credit cards segment. While debit card becomes a standard product offering with any saving account opening, the credit card is still a product, which many banks have been not forthcoming about launching. However the trend is changing and industry will witness entry of multiple banks each year for the launch of credit cards. This will not only serve as a big boost to the industry but will alsoensure that the customer gets the best of the card features and schemes.

Infrastructural challenges could soon become irrelevant

The country with its size and geography still faces challenges due to lack of infrastructure and spread of bankingservices in India. However, the technology can be a key driver to reach out to this vast unbanked population andelectronic payment systems can play a decisive role. New products like low cost ATMs and low cost wireless point-of-sale terminal can be used over wireless network to disburse cash at remote merchant locations thus eliminating the needto set up relatively expensive infrastructure. A debit, prepaid or smartcard can also act as a mechanism to enable acustomer access his funds or bank account.

EMV issuance is still far away

EMV migration is one of the greatest challenges that banks will have to face in the coming years. Although it is welldown the road in the UK, it has yet to be implemented in full scale in Asia. The next three years will be crucial for thedeployment of this international standard. India, being a nascent market, has very little legacy for implementing thischange. The acquiring infrastructure is already in the process of up gradation to EMV compliance and it is expected that

by the end of year 2005 most of the key acquirers will be EMV complaint. The issuance however, still seems a far-fetched dream. The business case on EMV issuance is still not present in view of smaller credit limits and low rate of fraud. However, some of the new issuers to enter in the market may come with a chip and may try to build other excitingapplications in and around the chip like loyalty, id etc., to make the proposition worthwhile.

KEY TRENDS


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Prepaid Cards on the horizon

Prepaid cards targeted at a specialized niche are making its presence felt in India. Many banks have launched cards like giftcard, travel currency card etc. We expect this market to grow and will help enhance the usage especially in the debit cardsegment.

Demand for premium and co-brand cards

The market witnessed a sudden surge in demand for premium cards with additional features like higher reward points, air miles, access to lounges etc. The upwardly mobile Indians are now willing to pay extra for these hosts of privileges. Thishad led to the launches like Gold Debit cards, Airlines co-brand cards, Travel specific cards etc.

Full ATM outsourcing

A trend that is starting to gain attraction in the European and Asia-Pacific markets is that of outsourcing part or all of theATM value chain. We expect the same to take shape in India too. Some banks are already beginning to see the advantagesof outsourcing, particularly on the maintenance / cash management / status monitoring side. ATM outsourcing activitieswill become feasible as players can set up a common ATM infrastructure and thereby gain from economies of scale.Smaller private and co-operative banks and banks with ATM branches in smaller cities where the volume of transactions is

not very high will also gain from such initiatives.

5

CONTINUED


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Industry Survey Report 2005