The Hindu Business Line : `India among fastest growing markets for Visa'

MR Santanu Mukherjee has been Visa's Country Manager for South Asia since July 2003. His domain extends over India, Pakistan, Sri Lanka, Bangladesh and Nepal.

Mr Mukherjee has earlier worked with PricewaterhouseCoopers, ANZ Grindlays Bank, and the Standard Chartered Group.

On a visit to New Delhi, Mr Mukherjee spoke to Business Line on a number of issues relating to payment cards.

How is Visa doing in India and what is the growth plan?

India is shining for Visa. There are roughly about 33 million Visa cards in India. Our market share in India by purchase volumes is 70 per cent against MasterCard. If you include American Express cards, our market share would be about 64-65 per cent. The volume of transaction as on September 2005 was $1.2 billion.

The number of Visa cards has been growing at about roughly 77 per cent compounded annually during the last four years. In terms of purchase volume, the compounded annual growth is roughly about 50 per cent. Visa started off as a credit card company, but is now a more diversified payment company. Now we have debit card, pre-paid card and smart card.

India and South Asian countries are some of the fastest growing markets in Visa's world. The only other country that could possibly be growing at a faster rate than India is China. India is also pretty much an incubator of new ideas and innovations. Some of these innovations like Visa Bill-Pay or Visa Money Transfer (that allows transfer of money to any visa card in India) M-cheque (payment by mobile phone) have come out of India. For example, Visa Money Transfer that was first introduced in India is now getting launched in Asia-Pacific and other parts of the world.

Is the acceptance of electronic payment picking up in smaller towns?

That is a very significant change in the last 4-5 years. Over the last few years debit cards that accounted for only three per cent of volumes of card purchases has reached 80 per cent. That is because while the credit cards issuable population is estimated to be 30-40 million, we can issue debit cards to just about anyone with a bank account. Just four or five years ago, credit cards were restricted to about 8-10 top cities. Today, cards are being issued - debit, credit, prepaid - in over 100 cities. While the larger part of the spends continue in the top 10 cities, people in the tier-II and III cities are getting more familiar with plastic cards. We are seeing a silent revolution taking place where cards are actually moving out to mainstream India.

Another important thing that is happening is on the pre-paid side. Prepaid population can be even larger. Whereas target population for credit and debit cards would be around 200 million, there are about 400 million who don't have access to bank account. These are micro-finance type of clients where prepaid will start making an entry.

Is the growth of ATM networks keeping pace with the growth of cards?

There are about 20,000 ATMs in the country today against 5,000 just four years ago. Large players such as SBI and ICICI Bank have been investing huge amounts in ATMs that are connected to the Visa network. But the power of the cards is not merely in ATMs but in merchant establishments. So, while you can use a card only at 20,000 ATMs, you can use it in over 1,80,000 point of sale terminals. That is also growing significantly. In the next 12 months this could go up to 2,50,000 POS devices in the country. Banks are also making forays into Tier-II cities where they have been installing terminals.

There has been growing concern over the way the plastic card industry has been operating. Recently, the RBI had to intervene with some guidelines for fair play. What are your views?

The RBI is actually very much pro-electronic payment. They are extremely supportive and want to promote payment cards. What they are trying to do is to put together a code of conduct that can be uniformly followed by all issuers and acquirers. This has been done in a collective fashion. The RBI did not wake up one fine day and start issuing guidelines. They formed a committee and invited people like Visa and MasterCard for discussion. The Singapore Bankers' Association has a code of conduct for self-regulation. I would not take it as something negative. When a particular institution grows, there are certain checks and counter-checks that need to be built in and it has been done in a proactive manner. I think people would take some time to adjust to it, but eventually it would be good for everyone.

There have often been allegations that card issuers charge high interest rates and the late payment charges are very steep. How do react to these views?

India has moved into a free interest rate regime. When we had our meeting with the RBI some groups (consumer) had made representations, but the RBI was very firm that we cannot on the one hand say interest rates have freed up and on the other side curb interest rates.

On late fees, I am not at all sympathetic. I do not see any harm in charging someone who fails to pay a bill on time. However, the RBI has done the right thing by asking banks to be transparent about the charges. The consumers should know that if he is using a credit facility he might end up paying a certain amount of interest. The consumer has a choice of not using that credit facility or over-leveraging the facility.

How can the Government or the RBI help you in making electronic payments more popular?

As a regulator, the RBI can only act as a facilitator. I think they are doing that. They are not putting any roadblock to the growth of the industry. While Visa is preparing a lot if its platforms, the big sectors that remains untapped is the Government i.e. the way government pays and receives payments. I think there is a change in mindset that is required, but we hope to get there.

What's Visa doing to check the card frauds, especially on the Internet?

Today, if your card is misused on the Net, you as a consumer are not liable. You can actually refute the transaction. You can go back to the bank and say that it is not my transaction. The bank would be forced to reverse the transaction. They would come back to you only if there is collusion. These are Visa regulations.