NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, June 24, 2015

BANGALORE, India — When Google launched prepaid vouchers in India last week, it was a nod to the country’s status as one of the major economies of the world with one of the poorest plastic card penetrations. That consumers on the subcontinent who do have debit cards see them merely as “ATM cards” is a humorless joke among business executives across the country. Typically, Indians use their debit cards to get cash from ATMs, which they then use for most payments — from groceries to wedding gifts.

It’s convenient, but India’s obsession with cash threatens to stifle growth in the world’s ninth-largest economy. New wealth and job-creating online and e-commerce services that are blossoming in the West won’t get traction here unless consumers have a quick and easy way to do business over the Internet. That’s where a host of new players – from Amazon to Alibaba-backed One97 – come in. They’re introducing a range of mobile-payments systems that could provide the backbone for an e-commerce boom.

About 210 million Indian households have bank accounts and of them only 2 million to 3 million people have debit cards, said Bipin Preet Singh, founder and CEO at One Mobikwik Systems Pvt. Ltd., a mobile wallet startup in Gurgaon, near New Delhi. Even among those who have debit cards, only about 10 percent are used online, he said. “The remaining debit cards are never activated, or they are used only as ATM cards to withdraw cash then do transactions using cash.”

India might have about 8 million to 9 million credit card holders, “which hasn’t changed much in the last many years,” he added.