State Bank of India is planning to install five lakh points of sale (POS) for both credit and debit cards in the country. To pursue this plan it is heading for a joint venture and has finalized the top three candidates for the same. The candidates are Visa, Royal Bank of Scotland (RBS) and Global Payments. Point of sale refers to electronic swipe machines used in retail outlets.
After having broadened its customer base with the introduction of core banking technology, SBI now plans to take the lead in electronic networking as well. The bank with an automated teller machine count of 20,000 has far left behind ICICI Bank in ATMs.
The POS terminals not only increase the acceptance level of the bank's credit card but also increase the revenue of the bank with every transaction they pursue.
With every swipe of card across the machine, the merchant pays a small amount from the transaction to the bank in the form of merchant discount rate. This money is shared by the bank that issues the card and the bank which owns the POS terminal. A small proportion is given to the payments provider, either Visa or MasterCard.
ICICI Bank had the largest network of POS Terminals with over 1.5 lakh machines. It recently diversified its POS network into a separate company where KKR-owned First Data held an 80% stake and the rest remained with ICICI Bank.
Axis Bank has over 1 lakh terminals followed by HDFC Bank, which has around 75,000 POS terminals.
Two recent developments have made POS a big business. Firstly, RBI has said it will allow small cash withdrawals through such POS terminals.
Secondly, it has said it would encourage banking correspondents to increase financial inclusions.
SBI's joint venture is said to be different from that of ICICI as SBI will still be holding the majority stake of 65% in the business.
SBI is likely to seek a brand premium from the partner as it will be sharing its name with the partner.