Market Insight TM

How cards can offer Indian

consumers more than cash
Using payment cards offers Indian consumers significant
advantages over cash. More convenience, greater security and
a better shopping experience are among the key benefits,
according to Amrish Rau, General Manager, First Data India
and ICICI Merchant Services.

Electronic payments can revolutionise the way people pay.

The increasing benefits of electronic payments worldwide can
be seen in their rapid growth across many emerging markets.
According to the World Payments Report 2010, non-cash
payments in Russia rose 66 percent between 2008 and 2009,
while China (+29 percent) and South Africa (+25 percent) also
posted large gains.

While India has seen similar growth numbers in debit cards

(+42% in FY2009-10 compared to the previous financial year
(*), cards still account for less than 5 percent of consumer
spending.
4. Reduced fraud risks: Statistics worldwide show that the
level of fraud on payment cards is lower than that for both
Why pay by card? cash and cheques.

Increasing card usage often depends on increasing
consumers’ awareness of the benefits of using them.
These include:
1. Convenience and control: Cards allow people to shop
and manage their spending without the need to carry
cash. Cardholders can choose between using debit cards
which gives them the security of knowing there will be no
interest payments on purchases or using credit cards for
greater flexibility.
2. Greater security: Carrying cash can be dangerous, with
the risk of both loss and theft. Using cards can reduce the
risk of money on the card being lost if the plastic is stolen.
Card purchase insurance may also be available on some
credit cards meaning that items purchased on those cards
are automatically insured against damage or loss, offering
consumers another important advantage over cash. This
would be especially valuable on high-value items.
3. Saving time: Cards save consumers time as they do not
need to go to the bank to withdraw cash from their
account before making a purchase. In India, where
people often have to travel large distances to get to a bank
branch, cards make it possible to carry out transactions
without the need to go to the bank – or to use cash at all.
5. Enables online shopping: An increasing number of
consumers in India’s Tier 1 and 2 cities are shopping or
making payments online, while the trend is also spreading
across the rest of the country. Using debit or credit cards
to transact online gives consumers more convenience and
flexibility about when and how they shop.
6. More payment options: Debit and prepaid cards give
consumers the convenience of paying by card without the
challenges of obtaining more mainstream credit products.
This is especially useful for risk-averse cardholders or
previously unbanked people.
7. Better consumer control: Cards give consumers more
control over their budget as consumers receive a monthly
statement and can also check their balances at ATMs,
online or at bank branches.
The need for cardholder education
Cardholder education is key to the development of electronic
payments in India. There are many examples in developing
markets where payment cards have been issued to large
numbers of cardholders – and have never been used. This
issue underlines the need for education campaigns to support
card acceptance to be organised either by industries such as
the travel or retail sector or by individual merchants and banks.
How cards can offer Indian consumers more than cash Market Insight
Cash vs cards – The advantages of electronic payments
This table below illustrates the typical advantages that card payments offer consumers over cash. Not all card products carry the
same level of functionality.
Cash
Budget control Some
Replaced if lost No
Monthly statements No
Transaction insurance No
protection
Card and transaction No
security features
Reward programmes No
Revolving credit No
SMS transaction alerts No
The benefits of such programmes can be seen almost
immediately and continue to grow over time. These include
increased card usage, a reduction of the dangers and risks
from carrying cash, lower levels of fraud and a better
customer experience. These programmes also enable
cardholders to understand the differences between debit and
credit cards, so that the more risk-averse cardholders and
those more comfortable using credit cards can find the
product that suits them best.
India is already making rapid progress in developing electronic
payments. Several industry-leading technology applications
are already widely used to improve customer service and
security. For example, Indian banks send SMS messages
to clients after they have made an ATM withdrawal so that
cardholders get confirmation that a transaction was carried out
on their account. Value-added applications like this encourage
more people to pay with cards.
To make sure cardholders have confidence to use their cards
and benefit fully from them, they need to know:
• The advantages of card payments over cash
• The difference between debit and credit cards
• How to use their card and where it is accepted
• The additional obligations of credit cards
• What fees, if any, are on the card they use
Cardholder education is an on-going process but one that can
potentially pay rich dividends for the cardholder, other
industry stakeholders and the wider economy.
In summary
Cards are more secure and convenient than cash. They also
enable people to join the mainstream financial community and
have access to a wider range of financial services.
©2011 First Data Corporation. All trademarks, service marks and trade names referenced in this material are the propertive of their respective owners.
Debit cards Credit cards
Yes Some
Yes Yes
Yes Yes
No Yes
Yes Yes
Yes Yes
Yes
Yes Yes
Banks, retailers and the wider economy would also benefit
from the development of electronic payments to both reduce
the cost of cash handling and make payments more efficient.
About the Author
B. Amrish Rau is General Manager, First Data India and ICICI Merchant
Services. In this role, he is responsible for leading and growing First
Data’s presence in India with executive management responsibility for
all of First Data’s payments services businesses including card issuing,
merchant alliance programs and ATM services.
About First Data
Around the world, every second of every day, First Data makes
payment transactions secure, fast and easy for merchants, financial
institutions and their customers. First Data leverages its vast product
portfolio and expertise to drive customer revenue and profitability.
Whether the choice of payment is by debit or credit card, gift card,
cheque or mobile phone, online or at the checkout counter, First Data
takes every opportunity to go beyond the transaction.
About ICICI Merchant Services
ICICI Merchant Services is different from other merchant acquirers in
India. We are an alliance between ICICI Bank, India’s largest private
sector bank, and First Data, a global leader in electronic commerce
and payment services. This enables us to deliver outstanding level of
reliability, innovative world class solutions with local expertise and
customer care.
Sources:
(*) Source: Reserve Bank of India Bulletin, June 2010
Please address media queries to
Deepa Jayaraman, Hill & Knowlton – Ipan by email at
djayaraman@ipanhillandknowlton.com or by phone
+91-22-40661755 (office), +91-98198 08681 (mobile)
Amit Gidwani, ICICI Merchant Services by email at
Amit.Gidwani@firstdata.com.au or by phone
+91-22-42294829 (office), +91- 91672 20914(mobile)