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new indian payment brand promises to be a Zero cost service
Zeroing in on smart
spenders
Manika Gupta
Fancy a situation where a cash withdrawal
from an ATM does not attract any additional charges, or the
merchants don’t have to pay a transaction cost of 2-4 per
cent for any over-the-counter purchase, with smart card technology
to back it up.
Says a recently feasibility study, prepared
by Ernst and Young: “There is a silent storm brewing in the
plastic card market as the first Indian payment brand—Zero—is
about to run its pilot project to be launched in the first
quarter of 2002.”
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Highlights
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Zero transaction
fee: There will be no transaction fee, which
is expected to dramatically increase merchant acceptance
of card-based payment systems by merchants of all sizes
(such as grocers, general stores and chemists).
Zero ATM cash withdrawal fee:
For ATM cash withdrawals between all member banks, there
will be no fees charged as against a Rs 75 charged currently.
Zero capital cost to banks:
Shared infrastructure is being set up by the industry
consortium, at no extra cost. Currently, installation
of an ATM machine is very expensive, costing anywhere
between Rs 8-12 lakh.
Zero limitations on the transaction
amounts: Even transactions below a rupee will
be allowed, which means anything and everything can be
bought through a card, even a 50 paisa transaction can
take place through the card. |
Pitched against the major international
brands—Visa and MasterCard—this first Indian payment brand
has been positioned in such a way so as to make plastic money
widely acceptable in the country.
Says the Ernst & Young report: “The Indian payment brand
will make it feasible for the smallest spender, shop, trader
and establishment to complete all sizes of financial transactions
without physical cash. This can make the card even find acceptance
in the remotest areas because of no lower limit on the transaction
amount.”
The card will be also timely because more and more banks are
joining the race to migrate from traditional magnetic strip
credit and debit cards to more secure and versatile smart
cards with an embedded micro processor chip.
Globally, every bank has been directed by MasterCard and Visa
to change the magnetic strips with smart cards by December
31, 2004. It will, therefore, become mandatory for banks to
start moving to the new generation chip- card.
In fact, this is the first real broad- based initiative to
launch an Indian payment brand using smart card concept. International
payment brands have been in existence in India for sometime
now, but this is the first initiative to launch an Indian
payment brand using smart card concept.
Zero is a unique business proposition, which will operate
a nationwide shared infrastructure for retail and remote payments
based on secure, multi-application smart cards.
There is a space for a better card as an alternative to international
payment brands such as Visa and Mastercard. Visa and Mastercard
both charge a transaction fee from the merchants, inter-bank
ATM cash withdrawal fee at Rs 75 per transaction, and the
cost of authentication for every transaction.
The new Indian brand represents a paradigm shift from the
existing business rules of transaction processing. Says Anurag
Gupta, CEO, Alittleworld, a service provider for Zero: “Unlike
Visa and MasterCard, our business model plans to demolish
all entry barriers for increasing the acceptance of the card
amongst merchant establishments of all sizes and the consumers.”
So, what is the profitability proposition for the banks and
the company? The banks who will be issuing the cards will
bear the actual cost of the card. They will be allowed to
charge a flat monthly network subscription fee on each card
from the customer. “This will be a nominal fee charged per
card per month by the issuing banks,” says Mr Gupta.
Automated transactions involving vending machines, payphones,
Internet and ticketing will earn fee on the face value of
the transaction, billed to the provider of goods and services.
A convenience fee will be charged for utility payments. In
the pilot project itself, 2,000 bill payment points are likely
to be available in Delhi alone.
The initiative will enable both online and offline modes of
financial transactions. The infrastructure will consist of
strategically located ATMs, PoS Terminals, utility kiosks,
vending machines, payphones and Internet terminals. It will
enable extensive use of cards issued by banks for direct dispensation
of cash, FMCG and services and also allow direct debit and
off-line debit, voice and text messaging, loyalty programmes
and home banking.
The project has the backing of 14 major global and domestic
players such as Compaq Computers, Sun Microsystems, Gemplus,
Wincor Nixdorf, ACI Worldwide, Datacard Group, and Proton
World International.
The pilot project plans to deploy 80 ATM machines, 4,000 PoS
terminals, 800 vending machines, and to issue over six lakh
cards.
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