MUMBAI | Online card payments are growing by leaps and bounds and are set to overtake physical card transactions in some years. At present, one in four card transactions in India takes place online and the number has been growing at 50% year on year as against the 35% growth in 'card present' transactions.
Online Payments on the rise
"The number of online transactions will catch up with physical transactions in a few years going by the present trends. Growth in online payments is being driven by utility payments, travel and ecommerce. What we are seeing is that growth in ecommerce in Tier-II cities is much higher than in metros," said Uttam Nayak, country head, Visa International.
Large growth in Debit
According to Reserve Bank of India (RBI) data, the number of card transactions per month in June 2013 rose to 8.47 crore - an increase of 35% from 6.25 crore a year back. This is largely driven by the surge in the use of debit cards, which have grown 45% from 3.30 crore transactions a month to 4.79 crore transactions. Debit card transactions have grown faster than the 24% year-on-year growth in credit card transactions. According to Nayak, growth in online payment is set to accelerate because today only 5-10% of the 125 million internet users actually pay online.
30% of total credit card spend is online
According to Rajiv Sabharwal, executive director, ICICI Bank, online spends account for 30% of total credit card spends of the bank. Also, spends in online segment are growing 35% (in value terms) as compared to 20% in the physical space. The private bank has been the first in Asia to launch Visa's CodeSure card under the brand name Carbon. The unique feature of this card is that it incorporates technology that enables the holder to instantly generate a highly secure dynamic passcode on the card itself. The card plastic incorporates an alpha-numeric LCD screen, a 12-button touch keypad and an in-built battery to generate dynamic one-time passcodes.
The display panel on the back of the card generates a one-time password (OTP) which can be used to authenticate online transactions. This means that the card is secure, even if somebody has fraudulently accessed the card number, as no online transactions can be carried out without the CodeSure PIN and OTP. Also, even if the customer loses the physical card, it cannot be used for online transaction without the CodeSure PIN which is exclusive to the customer.
3D Secure authentication
Nayak points out that, compared to other markets, RBI has been proactive in implementing 3D secure authentication. 3D secure systems require the user to provide a password in addition to the credit card details and the CVV number. This has dramatically reduced the frequency of online frauds.
Convenience driving growth
Bankers say that it is the sheer convenience of online that is driving growth in online payments. Besides utility payments such as telephone, electricity and water bills in recent years, insurance - both life and non-life - has been driving online payments. According to an E&Y report, India's consumer-facing ecommerce market (B2C-C2C) grew at a whopping CAGR of 49.1% from 2007 to 2011 to reach a market size of $9.9 billion. The report said that the internet user base will rise to 300 million by 2015 and the number of broadband subscribers will touch 100 million by 2014 and 150 million by 2020. The number of 3G subscribers is expected to reach 118 million by 2014 and 303.4 million by 2020.
Article source from The Times of India, September 13th, 2013.