Indian banks issued more than 16 million new debit cards during the peak months of the lockdown amid an increased demand by customers for contactless cards during the pandemic, dovetailing also the banking regulator’s directive to replace the old magnetic stripe cards with the new contactless variant.
Bankers and payment experts said this — mostly driven by new issuances by public sector banks — could also be on the back of increased push by the central government to expand the coverage of various relief schemes linked to Jan Dhan bank accounts. The beneficiaries require functional cards for access to the accounts.
“The pandemic has brought in better use case scenarios for digital payments, where we issued a lot of debit cards to new customers opening bank accounts to access government payments,” said a public-sector banker, requesting anonymity. “Some of it was also to customers who upgraded to chip and PIN cards as we migrated from magnetic stripe cards.”
The number of debit cards in circulation jumped to 845.4 million in June from 828.5 million at the end March, latest Reserve Bank of India data showed. In this period, the circulation of cards issued by state-owned banks increased to 597.1 million from 585.6 million, even as operations at branches were staggered due to the nationwide lockdown.
Private sector banks issued about 4 million cards in the period, with their circulation jumping to 168.6 million, the central bank data showed. Rest of the cards were issued by foreign banks, small finance banks and payment banks.
Since September of 2018, banks have been replacing old and redundant magstripe-based debit cards with the more secure, chip-based EMV cards.
The drive, which stretched over 12 months, had resulted in the number of debit cards in circulation contracting to 816.7 million in January 2020 from a peak of 998 million in October of 2018.
An analysis of RBI data over the last two years shows that the net addition of 16 million new cards between April and June of 2020 is the second highest over a quarter since banks initiated the replacement exercise in 2018.
“There could be three broad reasons,” said Navin Surya, the chairman emeritus of the Payment Council of India. “One is the pent-up demand since March and April which was reflected when courier services reopened in May. The other reasons are increased demand by customers for contactless cards during Covid-19 and the replacement of redundant cards by public-sector banks.”
Meanwhile, the RBI also for the first time has disclosed data on key acceptance infrastructure such as deployment of micro ATMs and Bharat QR stickers. As of June, 295,000 micro ATMs were functional. Banks had also deployed 2.15 million QR-based stickers in partnership with third-party payment companies.
As reported by ET, debit transactions saw a plunge of nearly 60% in April against the pre-Covid months of January and February, improving gradually to about 80% of the pre-pandemic volumes in June.
“While the pandemic will not lead to a seismic shift in digital payments like demonetisation did, we are easily seeing at least 7-8% of offline translations moving to online during this time; the opportunities on the digital side are huge,” said Sanjeev Moghe, Axis Bank’s executive vice president and head of cards & payments.
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