In May 2018, the monthly value of credit and debit card transactions done at point of sale (PoS) terminals have moved closer to Rs.1 lakh crore. This was indicated in the data released by the Central Bank in the monthly bulletin for July.
Card transactions amounting to Rs.93,860 crore was made at PoS terminals in May. The number of such transactions recorded for the month was 466 million.
When card-based transaction volumes at PoS terminals exceed the Rs.1 lakh crore milestone, this will mark a significant growth in digital payments in the country. Although credit and debit cards are used for online payments in India at e-commerce platforms, the RBI data is not inclusive of these transactions.
The frequency of card-based payment started rising in the month of April when several parts of the country started experiencing cash shortage. One of the reasons for the cash shortage was the scaling back of PoS networks by several banks. This resulted in a hike in transactions based on cash.
Although debit and credit cards have been the prime mode of merchant payments in India historically, the introduction of the Unified Payments Platform (UPI), mobile wallets, and Aadhaar-enabled Payment System (AePS) have provided other payment options for customers.
While transactions through mobile wallets hit 326 million in May, UPI’s figures for the month were 189.5 million transactions. This includes peer-to-merchant (P2M) and peer-to-peer (P2P) transfers.
Banks preferred the use of PoS against UPI, as the economics of PoS was favourable for banks. The fees earned by banks on UPI transactions were relatively lower than the MDRs of debit cards. MDR is basically a fee that a merchant pays to a bank for utilising its digital payment infrastructure. The MDR on debit card transactions stood at 75-100 bps whereas that for UPI was at 25-65 bps. The RBI has now reduced the MDR for small and large merchants.