SBI finalized two US based firms for joint venture of POS terminals network

State bank of India has finalized two US-based companies for the joint venture regarding the setting up of a network of point-of-sale (POS) terminals across the country. The two companies are Visa International and Elavon Inc.

The two foreign partners will provide payments technology solutions to SBI for setting up six lakh POS terminals at merchant establishments over the next five years.

The POS terminals are devices kept with retail and hospitality establishments for processing credit cards, debit cards, smart cards and other electronically submitted transactions in a traditional retail environment.

The POS system installed at retail includes a computer, monitor, cash drawer, receipt printer, customer display, barcode scanner, integrated card processing system, a signature capture device and a customer pin-pad device. When customer make payment with card, the merchant swipes the card at the terminal on keys-in payment information and the terminal does the rest.

At present merchant establishments in India, have to pay between 1.5 and 2.5 per cent of the transaction value to merchant acquiring banks. SBI is having talks with its partners to finalize the details of the joint venture, including signing of the memorandum of understanding, shareholders' agreement, capital structure and Foreign Investment Promotion Board approval for capital infusion, with its partners.

In January 2010 bank had launched SBI Payment Services Pvt Ltd, a wholly owned company, the joint venture partners will be initiated in the company to carry out merchant acquiring business.

A senior official told in the joint venture SBI will be the major share holder (over 51 per cent stake) even after the wholly owned subsidiary is converted into a joint venture. He added, the new entity will be a good source of non interest income.

As the POS terminal will be a tool for acquiring and retaining merchant establishments as customers, these can further be used for financial inclusion as it can be used as an alternative delivery channel in areas where it is not feasible to set up a branch or an ATM, said the official. In order to enhance usage of plastic money for the customer convenience the RBI has set the cash withdrawals up to Rs 1,000 a day per debit card issued in India at POS terminals.

A merchant establishment's account gets credited by about Rs 5 for every Rs 1,000 disbursed through the swiping of the card and SBI has issued around 7 crore debit cards up till now therefore the POS terminal will help in increasing their usage

As a future plan bank is thinking of using POS for mobile top-ups, utility bill payments, booking of railway and movie tickets.