India Aims to Reach Unbanked by Selling Prepaid Cards Through the Postal System

The postal department in India along with banks like IDBI Bank, HSBC Bank and ICICI Bank have launched a program this month to sell prepaid credit cards in 800 post offices across the country. The new initiative will leverage the cash-handling expertise and network of Indian Post to enable all consumers — even those in the more rural areas — to purchase goods and services without having to carry cash.

The white label prepaid card will bear the MasterCard emblem and come with a pre-determined cash value ranging from Rs 1,000 to Rs 50,000. It can be used at merchant locations, ATMs and designated post offices subjected to approval by the Reserve Bank of India. Users will have to pay an activation fee for the card and the amount loaded onto the card, which is reloadable.

More people are expected to begin using prepaid cards in India in the coming years due to the launch of the white-label prepaid cards by the Indian Postal Department and also the rising number of online transactions that have been made possible due the increase in Internet penetration. Prepaid cards gained even further traction during the global economic downturn as many consumers opted for them in order to keep rising expenses in check and to cut discretionary expenditure. Furthermore, for people without a bank account, prepaid cards have provided the convenience and security of a card product without requiring an existing banking relationship or credit history with an issuer.

India has posted some of the highest growth both in terms of the number of prepaid cards and payment volume over the last decade. Since 2000, the number of cards in circulation has grown at a CAGR of 65.9% to 39.2 million cards in circulation in 2010, according to the latest figures available from Euromonitor International. The payment volume of prepaid cards in Indian has grown over that same period at a CAGR of 92.4% to $US3.6 billion in 2010 . In comparison, the number of prepaid cards worldwide has grown at CAGR of 7.0% and the payment volume has grown at a CAGR of 20.8%.