The Hindu Business Line : Debit card usage at point-of-sale rising

Earlier they tried to wean customers away from branch transactions to automated teller machines, (ATMs). Now banks are trying to migrate them to the next stage of conducting transactions at shops by swiping their debit cards at point-of sale (PoS) terminals. Instead of drawing cash at an ATM and then using it to buy goods at shops, customers are being encouraged to use the debit cards directly.

According to statistics from Visa International, debit cards in India have seen a huge surge in the last one year. Currently, 25 banks in India issue Visa debit cards and over 1,17,000 electronic PoS machines accept Visa cards. The total number of Visa debit cards at the end of December 2004 is 2 crore, which is 91 per cent higher than at the end of December 2003.

Most banks now offer debit-cum-ATM cards to their deposit holders. This is the next step towards a cashless era, say bankers. With debit cards, customers need not worry about running out of hard cash.

For the shopkeepers, the advantage of PoS transaction is getting the money credited to their accounts immediately. So, they don't have to worry about cash management. They also avoid the hassle of handling soiled notes.

Mr Aspy Engineer, Vice-President, Retail Banking, UTI Bank said, "Merchants prefer the PoS terminals, because documentation and back-end work is taken care of. Besides, debit card usage also helps avoid the problem of counterfeit notes that some of them face."

The idea is to not to make the customer spend more, but to make the customer spend smarter, said Mr Engineer. "Migrating from cash to ATM is to save cost and time. But moving from ATM to PoS means more convenience for the customer," he said.

UTI Bank launched its debit card in 2002. So far, the bank has deployed 12,000 PoS terminals. The bank plans to deploy 20,000 terminals by the year-end.

Ms Tanu Bhargava Goenka, Manager, Cards, UTI Bank, said, "We are also recalling all old ATM cards and replacing them with debit-cum-ATM cards. We are phasing out over 5 lakh ATM cards."

The bank sees an average of 1.5 lakh number of transactions, worth Rs 1 crore, a day through PoS, she added.

ICICI Bank, which is the leader among private banks, has a base of 60 lakh debit cards. These are accepted at over 30,000 merchant establishments across the country.

Having started issuing debit cards in 1999, HDFC Bank has witnessed a 50-60 per cent jump in its PoS spends, in the last eight months said Mr Amresh Acharya, Head-Liabilities Product Management, HDFC Bank. The bank has over 40,000 PoS terminals.

He said, "We are seeing a transition shift to PoS. Probably just 5 per cent of our customers have plain ATM cards. Bulk of them have debit-cum-ATM cards."

However, changing the customer mindset is not easy. Mr Acharya said, "We have been the first to set up PoS terminals in smaller cities. But it is taking time to change people."

Ms Goenka said, "We are planning to target smaller towns such as Jaipur, Indore and Madurai for instance."

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