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First Data Aims at Government Transactions

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In December 2009, US based $10.5 billion company, First Data, which is world’s largest provider of electronic payments, had purchased ICICI Bank Ltd’s majority 81 percent stake in its point-of-sale (PoS) terminal network in a deal valued around $80-90 million.

Now First Data has set its eyes on processing government transactions linked to MNREGA, utility bill payments and railway booking transactions through its PoS network.

In 2012, First Data will add 50,000 terminals to its existing network of 180,000 terminals. Talking to the media, B. Amrish Rau, vice-president and country manager at First Data India, said, “We want to invest wherever the opportunity like NREGA payments, public distribution systems electronification. We need to drive more products through our channel.”

Merchants pay 1.1 – 1.8 percent of the purchase as fee besides installation charges to use the network, which is shared between the bank that has issued the card under transaction and the bank that has installed the machine.

Banks earn fees and also get cheap funds through current accounts that merchants open. They also cut costs by building their own network as they do not need to move money in physical form. According to First Data’s own estimates, 170 million transactions are conducted in India every year, more than half of which is processed on their network.

Once First Data and other companies in the electronic payments space are able to build the last mile connectivity in the villages, millions of MNREGA workers will be able to transfer money electronically for their daily needs.

Compared to China, India is still a nascent market. For instance, China has 900 million cards with two million PoS terminals.

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