Prepaid the India Way: Mapping the Landscape of Opportunity – Bank Cards, Banking, Business and Finance Industries

Business and Finance Reports

The Prepaid the India Way: Mapping the Landscape of Opportunity Report has been published. It provides updated in 2018 year analysis of industries from Bank Cards, Banking, Business and Finance, Home Markets.

What makes India different? There is not really room in a brief report to begin to scratch the surface on the unique characteristics of one of the world's most interesting and dynamic countries. A billion citizens, a history as long as history itself, and one of the most rapidly evolving economies that the world has witnessed; these only begin to tell the story. To borrow a metaphor from the late, great C.K. Prahalad: we could think of India as a kaleidoscope; each time we give it a small twist we see different angles and facets. If we focus on one area, we miss one thousand others.

“India is a US$6tn market, which comprises B2C, B2G, and B2B. Out of this, only transactions worth US $20bn is via electronic payment. This suggests that 96% of the market is yet to be captured.”
Sachin Khandelwal, General Manager: ICICI BANK /Chairman of Prepaid Int'l Forum.

It is in this phenomenally exciting and challenging environment that this report takes shape. Financial services are changing almost as fast as India is changing, and that is creating a vacuum in terms of market knowledge and consumer understanding. Prepaid the India Way hopes to partially bridge this gap and provide direction to those who want to develop this unique market. Prepaid the India Way employs a unique research method in order to provide a deeper insight into a unique market. Global Prepaid Exchange's belief is that the complexities present in India, with its huge diversity of peoples, create the necessity to use multiple methods of data collection and analysis. To this end, they have thoroughly examined the available government and industry statistics that are likely correlates with the attitudes and behaviors of the end-users in this market. While some analysts would stop there, the authors have also relied on interviews with the country's leading thinkers and practitioners in the prepaid space. Their experience and wisdom allows the report to overlay the secondary data with the knowledge of the people who are actually shaping this industry as it develops. Finally, local research teams from Cheers Interactive interviewed over 1350 Indian consumers to measure awareness of the current product offerings, to assess how well these products were perceived to meet their particular needs, and to gauge the factors that might accelerate or inhibit more widespread adoption.

For almost 20 years, organizations have sought to take advantage of the emergence of a huge Indian middle class. But experience has shown this quest to be difficult. The emerging consumer classes are many things but they are definitely not, A) monolithic, or B) identical to the middle classes in the US and Europe in either attitudes or behaviors. The realities on the ground in India create different needs and norms which make it hard for outsiders to grasp that the Indian middle class is both real and myth; something of considerable substance, but also something that is difficult to actually see, touch, and serve.

Prepaid is an emerging market with many application areas, roles, and companies whose operational areas and borders between them are not clean cut. It is not unusual that a company will offer a range of products and services spanning multiple areas of the value configuration. Compared to credit and debit cards, prepaid is a niche industry which is fragmented into a number of sub-niches – Gifting, Payroll, Travel/Foreign Exchange, Remittances, Government Disbursements, Transit, and General Purpose solutions — to define this report's scope.

Paper was the dominant format for prepaid gifting and employee benefits (e.g. luncheon vouchers) until the new millennium when plastic cards began to claim market share. From 2005, there has been a major shift globally in formats used for prepaid, with increased speed in the movement from paper vouchers to plastic cards. Compared to paper vouchers, plastic cards have lower fraud, are convenient for customers, are more durable, and give the cards a modern feel. Along with the increased uptake in plastic cards, from 2005 the concept of virtual prepaid solutions started to gain traction, and it is predicted that virtual “cards” might claim as much as 25% global market share in prepaid by 2015.

The card payments infrastructure is too expensive for the vast majority of Indian retailers to afford, especially unorganized retailers (comprising 95% of retail outlets in India); hence reliance on card infrastructure with POS terminals limits the monetization options and success potential for prepaid. Indians are famous for finding lowcost alternatives to expensive “global” solutions. Given the explosive growth in mobile penetration, it seems logical to assume that card payment applications enabling a mobile phone to accept card payments might be a more viable solution – and not just for rural India.

In the past in India, prepaid services were primarily provided by telecom companies. In addition, corporate gift vouchers and food coupons have long existed and been used in India for various tax-related benefits and incentives. Many branded outlets, superstores, and malls across the country also provide gift and discount vouchers or coupons. Currently, the market is witnessing the entry of general purpose reloadable prepaid cards for payments through internet, mobile phones and POS. Oriental Bank of Commerce was the first bank to launch India's MasterCard based prepaid card which has the facility to withdraw money from ATMs. Many other banks have followed with the introduction into the prepaid market of various pre-loaded cards such as
gift cards, travel cards, meal cards, payroll cards and multipurpose cards.

The combined current market opportunity (potential annual card load value) for the seven prepaid applications covered by this report in 2011 is USD 9.31 billion (INR 41 910 crore). By relative comparison, three prepaid applications are in a growth phase characterized by increasing competition and customer take-up: Payroll, Travel/FX, and General Purpose Reloadable.

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