State Bank of India is planning to form a joint venture company to ramp up its merchant acquiring business.

This comes in the backdrop of the bank setting an ambitious target of scaling up its point-of-sale (PoS) terminal network from over 5.50 lakh now to 10 lakh in the next two-three years.

India’s largest bank is seeing a huge opportunity in merchant acquiring business (MAB) in the wake of the government’s push for digital and card payments to build a ‘less cash’ economy following demonetisation.

The big push by banks to expand MAB is underscored by the fact they collectively added 6,30,179 PoS terminals in the 10 months to January 2017. Bulk of the PoS terminal additions — 4,25,133 — happened after demonetisation of ₹500 and ₹1,000 bank notes was announced on November 8, 2016. As at January-end 2017, India had 20,15,847 PoS terminals.

Transaction value

In sync with the ramp-up in PoS terminals, the value of transactions jumped 52 per cent to ₹49,004 crore in January 2017 from ₹32,174 crore in November 2016, according to Reserve Bank of India data.

SBI is seeking a joint venture partner that can bring in necessary experience, expertise, capital and technology needed to achieve the 10 lakh PoS target. The bank will have majority shareholding in the proposed JV, which can leverage SBI branches for getting referrals.

As at January-end 2017, SBI had an installed base of 4,31,430 PoS terminals (this excludes the terminals of the five associate banks and Bharatiya Mahila Bank, which merged with SBI on April 1). It added 1,29,311 terminals in the 10 months to January 2017.

Besides increasing the reach of the traditional PoS and mobile PoS, SBI also wants the JV to offer person-to-merchant (P2M) products on PoS, such as Bharat Quick Response code-based acceptance, Unified Payments Interface, Aadhaar Merchants Payment System, e-commerce, and payment aggregation services.

Under MAB, a bank provides necessary infrastructure and facilitates payment for goods and services purchased through the medium of a card.

The stakeholders

The various stakeholders in an MAB are: the issuer (the bank that issues cards); card-holder (customer/non-customer using the card to make payments); merchant (entity which accepts payments through cards); acquirer (the bank that provides necessary infrastructure, such as POS terminals to merchants to accept payments, maintains relationship and facilitates acceptance payments via cards); and intermediary agency (RuPay, Visa or MasterCard which facilitate interbank settlements).

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