SBI has shortlisted three candidates - Visa, Royal Bank of Scotland (RBS) and Global Payments - as potential partners for a joint venture that will install five lakh swipe machines for credit and debit cards across the country.
After putting in place a core-banking solution, SBI has been in a hurry to acquire leadership position in electronic networks as well. SBI, which has over 20,000 ATMs, has long overtaken ICICI Bank in ATMs.
Electronic swipe machines known as point of sales or POS Terminals, besides increasing acceptance for a bank’s credit cards also earn a revenue for the bank out of every transaction.
Each time a card is swiped, the merchant pays a small per cent of the transaction in the form of a merchant discount rate. The money is shared between the card issuing bank and the bank that owns the POS terminal and small portion goes to the payments provider, either Visa or Mastercard.
What makes POS terminals big business are two recent developments. First, 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.
In the banking industry, retailers with a swipe terminal are seen as ideal banking correspondents as they can facilitate payments and withdrawals in unbanked areas as long as there is telephone connectivity.
SBI is likely to seek a brand premium from the partner since the bank will be lending its name to the business. The bank will also be actively involved in acquiring merchant establishments and will receive some kind of payments for services provided.
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