Visa sees $93 billion opportunity on the cards

Card company Visa expects pre-paid cards to present a $93-billion opportunity in India. Visa is working with various providers, including mobile companies to tap the pre-paid market. 

At present, debit and credit cards account for only 3% of personal consumption expenditure and cash is still used as a large part of the payments. According to Visa, pre-paid cards are best placed to displace cash. “Credit and debit cards can only go so far. There is a need for a new instrument that competes with credit and debit cards to attract new segments,” said Neel Nilakantan, regional director — Pre-paid Products, International, Visa. 

Policymarkets and regulators have been championing the cause of electronic payments. The central bank is keen on migrating payments to the electronic mode because this would also bring down the cost of currency management for the economy. But one of the main impediments has been the high cost of transactions which make card payments uneconomical for low value. 

“The charges on card payments are largely determined by banks who control that part of the value chain,” said Mr Nilkantan. But pre-paid cards offer an opportunity for banks to bring down costs as they would stand to earn a large float on unused balances. There is also the potential to get large volumes. “We do perceive that banks would come with attractive pricing to get a larger share of the market,” he added. 

In India, pre-paid cards have achieved a very low market penetration. These cards are popular largely in overseas travel. According to a survey conducted by Visa, pre-paid payment card ownership in India was very low with only 2% of those polled ever using a pre-paid payment instrument. However, there is potential for growth, given that four out of 10 respondents were aware of the product (40%), and eight out of 10 (84%) said they would like to own such a product in the near future. 

According to Mr Nilkantan, there is a huge opportunity in using pre-paid cards for payroll purpose, particularly in case of contract labour. “A contractor making payments through pre-paid cards would save on the cost of salary processing. It will also save them the hassle of opening bank accounts, considering that the pre-paid card is reusable,” he said. He pointed out that in the US, several employers use pre-paid cards as they improve administrative jobs and replace manual tasks like cheque processing.