In a country of over 1.2 billion people, with a large percentage of them unbanked, India is perhaps the most varied emerging market for prepaid cards worldwide. Tony Craddock, Chief Executive Officer and founder of Global Prepaid Exchange, characterized prepaid in India as a potentially $9 billion market that, due to its complexity, takes time and dedication to understand and profit from.
"India is a kaleidoscope," Craddock said in his presentation at the 2011 Prepaid Expo held in Orlando, Fla. "It's a beautiful picture. You turn it slightly, you may look at it through a slightly different lens or you might explore it from a different perspective, or a different region. And this is so big and so complex, and actually it's quite tricky to get a consistent picture."
Global Prepaid Exchange and its partners, including American Express Co. and prepaid news outlet Paybefore, endeavored to bring that picture into focus in their joint report, Prepaid the India Way: Mapping the Landscape of Opportunity. The research revealed that the 3-year-old prepaid card market is crystallizing around a popularity for gift, transit and general purpose reloadable cards; in all three categories, the population sample expressed a high level of awareness, above 75 percent of the over 1,350 Indian consumers surveyed.
Remittance and government benefit cards also scored highly in the survey, while lower numbers for payroll cards suggest that category is less likely to succeed with Indian consumers, Craddock stated.
With 650 million mobile handsets in circulation in India and upward of 85 percent of them being prepaid, the researchers asked whether the market would spurn plastic cards in favor of virtual ones, as has largely happened in Kenya with Safaricom's popular M-Pesa product. "The answer is no," Craddock said. "Plastic and paper still have a role to play and will still be a very important part of it. And we think, ultimately, virtual and mobile distribution of payment will be no more than 20 percent in five years' time."
In his presentation, Craddock listed the following downsides of the Indian prepaid card market:
According to Craddock, foreign prepaid card providers cannot expect to conquer the Indian market in a year's time. "You have to be here in India for the long term," he said. "You have to do prepaid the Indian way."
One tricky aspect of the "Indian way" is the nuanced meanings around the word "yes." The cultural norm is for Indians to say "yes" to questions, rather than "I don't know," even if the latter is more accurate when viewed through a Western lens. "And that's very important," Craddock said. "For example, if you are doing business in India, saying 'yes' does not necessarily mean 'yes.' It might mean, 'Yes, I understand,' or, 'Yes, I get it,' or, 'Yes, I'm interested.' It doesn't necessarily mean, 'Yes, I'm doing business [with you.].'"
Another obstacle to doing business in India is the presence of a large and ingrained informal economy: cash-based, merchant-to-merchant transactions that take place outside of India's formal tax system, Craddock said. It is one reason why the Reserve Bank of India is pushing its financial inclusion initiative – to increase the tax base by enrolling more unbanked consumers with financial services products that can be tracked and taxed, Craddock added.
Craddock outlined several aspects of India that benefit prepaid card adoption. He said Indians have strong religious and cultural reasons for not using credit cards. At the same time, they exhibit sophisticated Western payment habits that the retail sector will eventually adopt.
On the regulatory front, RBI recently tweaked regulations to allow for the existence of program managers in the financial system, which Craddock said shows Indian regulators' ability to quickly modify its laws to spur innovation in the marketplace. With program managers now established, India's nascent prepaid card industry will be able to take advantage of the nation's intelligent, educated, industrious business class.
"If there was one place in the whole world where there's a flood of entrepreneurial potential, with the education to support it, it is in India," Craddock said.
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