The need for POS infrastructure in India
With RBI’s major step to appoint a former UIDAI (Unique Identification Authority of India) chief Nandan Nilekani as the chairman of a five-member high-level committee, the anticipations of various advancements in the FinTech domain have got raised.
A major part of this committee is to increase the provision of digital payments in rural areas also apart from urban areas. For this to happen, availability of POS infrastructure in India is the need of the hour.
In a recent article in Hindu Business Line, Mr. Rajesh Desai opined to “Incentivise the payment PoS manufacturer in India to increase PoS base through local manufacturing.”
This suggests that POS manufacturers in India are one of the key drivers of the success of digital payment sector.
Having said that, the FinTech will be able to spread the power of its secure, quick and convenient transaction related services only when the related areas are growing parallel to it.
Few of the major players operating in India POS terminals market include Verifone India Sales Pvt. Ltd., Ingenico International India Pvt. Ltd., Ezetap Mobile Solutions Pvt. Ltd., Mswipe Technologies Private Limited, MobiSwipe Technologies Private Limited, Pine Labs, PAX Technologies Pvt. Ltd, and so on.
BENEFITS OF HAVING POS INFRASTRUCTURE
In the era when online payments have picked pace with all the zeal, the availability of greatly working PoS infrastructure is a necessity.
PoS manufacturers in India can become a big supporter of Digital India initiative as they can make installation of the machine at certain outlets quite convenient.
If PoS manufacturers are incentivised and given the support as required, it will benefit the businesses in several ways. More of PoS manufacturers in the country means more of all the advantages that come with it.
Firstly, the machine is available at a lower price as compared to the machines manufactured by companies abroad.
Thus, it would successfully reduce the expenditure of businesses opting for it.
Secondly, it helps rural sectors adopt PoS machines without paying a hefty amount for them. Moreover, the availability/supply of these machines would be much easier.
Thirdly, the manufacturers of PoS machines can look into the demands of the businesses locally and can inflict changes in supply accordingly.
The endless advantages of greatly working PoS manufacturers in the country can steer the nation toward progress drastically and help keep pace with the digitization.
As PoS manufacturers in India are suffering from manufacturing glitches, it has impacted the reach to unorganised retail merchants/rural markets/small businesses significantly.
In an article in Financial Express, a PoS manufacturer said, “We had to reorient our strategy in terms of the manufacturing plans, but currently, we are not close to the numbers we had anticipated”.
GROWTH OF POS TERMINALS
According to a data published by RBI, the number of point of sale (POS) terminals grew up to 3.14 million in March 2018, up 24% from 2.53 million in March last year.
However, this growth in the terminals is anticipated to be higher with incentivising of PoS manufacturers in India.
Above chart shows the growth of PoS terminals over a period of time in India which is happening at a slow and steady rate.
THE REASON BEHIND SLOW AND STEADY GROWTH OF PoS TERMINALS
According to an article in Wallet buddy, the cost of a point-of-sale (POS) terminal in India ranges from INR 8,000 (USD 118.9) to INR 12,000 (USD 178.3); countervailing duties and taxes account for about 20 percent of the price.
In addition, the annual operating cost is INR 3,000 (USD 44.6) to INR 4,000 (USD 59.4) per terminal. That covers paper and servicing costs, amounting to about INR 3.9 billion (USD 0.06 billion) annually for all installed 1.3 million terminals.
Additional costs include those to build merchant and acquirer capabilities.
A high rate of staff attrition at merchants of 30 percent to 40 percent a year makes the process of capacity building onerous for all parties involved.
Finally, low transaction values and volumes at smaller merchants, especially outside of Tier 1 cities, make it unviable for banks to expand their footprint into such segments.
|Manufacturing in a country abroad (Three weeks or more)
|Import (Three weeks)
|Customs Clearance (Three weeks)
Source: Wallet Buddy
The flow above shows the journey of PoS machines or terminals when imported. This journey consumes maximum time and is not cost effective and thus, poses a problem for the merchants in the country.
It is quite evident that the journey of a PoS machine from the manufacturer to the retailer (business) needs to be made even simpler for the country to progressively acquire the number PoS terminals required.
|Months (Year 2018)
|No. of Transactions with Credit cards(Actuals)
|Amount of Transactions with Credit cards (Rs. Millions)
|No. of Transactions with Debit cards(Actuals)
|Amount of Transactions with Debit cards (Rs. Millions)
Above table shows POS transactions in India in the year 2018
Hence, we can more easily achieve our target of making the country digitally inclined if certain measures are taken and, it can pace up the country to grow parallel to the more developed nations successfully.