Chase Paymentech Expansion into India
|Chase Paymentech Expansion into India |
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|Daniel Hollister, William Mui, Rebecca Peedin, Seung-hun Kim |
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|Professor Peev – International Marketing Project |
I. Executive Summary
India, one of the world’s biggest countries, has seen its consumer spending skyrocket in recent years. Chase, a subsidiary of JP Morgan, is one the world’s leaders in the payment processing industry. To take advantage of the growing popular country of India, the company will take its brand extension, Chase Paymentech and introduce it and penetrate the market of local businesses. For more than 25 years, Chase Paymentech has provided merchants point-of-sale terminals that accept payment methods of credit cards and debit cards. It hopes to provide opportunities for local merchants in India to accept payments in advanced manner, instead of cash.
II. Target Country General Facts
Located in South Asia, India is the 7th largest country in the world with a population over 1.2 billion people. Over the past thousand years, Indian history has been identified with its cultural wealth. Four major religions, Hinduism, Buddhism, Jainism, and Sikhism were originated in India, which contributed to the country's diverse culture. In 1947, the leader of Indian nationalism, Mahatma Ghandi, led protesters to engage in non-violent campaigns of civil disobedience to gain independence. Since India's independence, the country has been marked by poverty and corruption. But, as a positive, independence resulted in the rise of diversity of culture and religion (, 2008).
A landmark that plays an important role to the climate of India and is slightly northern of the country, are the Himalaya Mountains. These mountains prevent the cold winds of North Asia from blowing into India, protecting the country from severe winters. Although the country, in general is protected from cold winds, the temperature in the mountains decreases at the altitude increases (Facts-About-, n.d.). Considering the mountains are located in the northern part of India, this makes this part of the country the coldest. On the western side of the country, near Pakistan, the climate tends to be hot and dry. Overall, the country is composed of multiple climates which consist of hot-dry, warm-humid, composite, temperate, and cold.
When entering the international market, it is not only important to understand India's background; it is also imperative to have knowledge of the country's economic situation. Recently, India has opened up to global competition and is now the fastest growing open market economy. Although India faces challenges, including over population, extensive poverty, and widespread corruption, the country's economic development is increasing.
III. Economic Analysis
According to The World Factbook, the country’s Gross Domestic Product (GDP), or official exchange rate topped $1.798 trillion in 2011 (CIA, 2012). This indicates that the country is in a healthy condition financially. India's GDP growth rate is 7.2%, which puts India's economy in 10th place in the world. Even with an unemployment rate of 9.8% and below poverty line rate at 29.8%, India still takes 2nd place as the world’s largest labor force with their 487.6 million workers (CIA, n.d.). Over recent years, with a 16.9% increase in 2011, the personal income per capita in India is averaged at $1,000. India accounts for $299.4 billion in exports and $461.4 billion in imports, which is the major source of economic growth (CIA, n.d.).
India will be able to maintain economic growth in the future, considering the fact that there are many resources and industries throughout the country. Resources that are exported include rice, wheat, oilseed, cotton, jute, tea, sugarcane, lentils, onions, potatoes; dairy products, sheep, goats, poultry, and fish (CIA, n.d.). Domestic production is also important in economic development for India because it keeps Indian currency circulating throughout the country rather than in other countries. With multiple industries in India, such as textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, and pharmaceuticals, India has the opportunity to provide jobs for the unemployed and increase personal and household incomes (CIA, n.d.).
As the second fastest growing economy in the world after China, India has great opportunities in its future. The country has a stable annual growth rate, rising foreign exchange reserves, booming capital market, and expanding foreign direct investment inflows. For businesses who wish to invest in foreign markets, India is the 5th most favorable investment destination. In the next 5 years, India is expected to accelerate its retail growth up to 20%. By 2020, India is expected to be an economy of over $5 trillion.
When it comes to household income or consumption by percentage share, its highest 10% was 31.1%, while its lowest 10% was 3.6% in 2005. Given that the country has a large population of over 785 million, if the highest 10% of household income is at 31.1%, this means that over 244 million people are among the richest in the country.
IV. Current Trends
India’s Large Population
To better understand if our product would be a good fit in this market, we looked into a variety of relevant trends and uncovered the following information. As of July, 2012, the population of India is 1,205,073,612 with a growth rate of 1.312% ("People and society," 2012). While this rate is currently only the 88th largest in the world, it is still increasing by roughly 15,810,566 people a year which is essentially the size of some small countries. Keeping in mind the magnitude of India’s population, roughly 65.2% of its people fall between the age cluster of 15-64 which is roughly 785,224,340 people. What can be inferred is that there are roughly 785 million people in India that are categorized into the age group of citizens that can potentially hold a job. Also, at least “ten million young people will enter the workforce every year for the next decade or so” (Pune, 2012). This data offers potentially good news for our product expansion into India. With such a large and growing population, more Indian citizens will be entering the work force which in turn provides these people with a disposable income to be spent on products and services. If all this money is being spent then there is certainly a reasonable argument that our point-of-sale equipment could be useful in the Indian society. The current issue at hand, however, is that cash transactions are the primary form of payment in India right now. While this does appear to be a small barrier for us, the Federal Bank of India offers some good news. According to its website, “India is moving to a cashless era and with the tremendous increase in the growth of debit and credit cards” (Point of sale, 2012). If this is so, it would be wise for our company to enter the Indian market and establish early relationships with retailers in hopes of someday becoming the leading provider of payment processing devices.
Technological Advancements
As our product is classified as a piece of technology, it only made sense to dig deeper into the current technological trends in India. Surprisingly enough, the banking sector has generally been one of the more profitable sectors for the information technology industry. India’s top IT firms “have been catering to the technological needs of many of the world’s top banks, and the same trend will be seen in the Indian banking sector with the Reserve Bank of India bringing in a host of technology measures and initiatives” (Jayaraman, 2011). Currently, there are more consumers who are mobile phone subscribers than bank account holders and one way banks are trying to bridge this gap is through the implementation of mobile banking. To help speed up this process, the Reserve Bank of India created the Mobile payments Forum of India which is responsible for examining “different aspects of mobile-banking such as technology and security issues, business issues, and regulatory and supervisory issues” (Jayaraman, 2011). It was also noted that the Reserve Bank of India raised the limit of mobile banking, in May of 2011, from 1000 rupees per transaction to 5,000 (Jayaraman, 2011). As a result, there was a significant increase in rupees transferred via mobile phones just a few months later. It is almost as if there is a technological movement taking place in India. The Reserve Bank is trying to push more people towards mobile banking which would potentially reduce the amount of cash transactions and lead to more card transactions. If this is the case, retailers and other businesses could realize a sudden need for payment processing machines.
The development of ADF (Automated Data Flow) and XBRL/iXBRL standards have also had a recent impact on the banking sector. This Automated Data Flow advancement was designed in an effort to “streamline the Reserve Bank of India’s data collection processes and also ensure the quality of the data it obtains” (Jayaraman, 2011). Before, the Reserve Bank of India had no definitive way to collect data from all other banks and this ADF provided an electronic, hassle free alternative. Many banks believe that ADF would “definitely help them streamline their processes and meet the Reserve Bank’s standards” (Jayaraman, 2011). XBRL is a standards-based way to communicate and exchange business information between business systems and one of the main uses of XBRL is, coincidentally, to define and exchange financial information. Essentially, Automated Data Flow assures that all banks are in compliance with the Reserve Bank of India and that they are all following the same standards while XBRL is a secure technology used to aid the transfer of such information. It appears that the Indian government is trying to instill confidence in local banks. These advancements should create a safer, more reliable banking system which should hopefully lead to more people opening up accounts. Once again, if the banking sector takes off in India then the importance of credit and debit cards to these people could mirror the importance of them to American users.
The increased use of social media and interaction with other technologies is another interesting facet of the Indian society right now. The Reserve Bank of India has been doing research and has asked the public for its opinion “on what consumers would like to see in its website to make it more informative and user-friendly” (Jayaraman, 2011). They have gotten a lot of feedback and have considered using social media as move towards attracting more traffic to the banks website. Reserve Bank Deputy Governor K.C. Chakrabarty believes that social media allows for “one influencer to potentially drive thousands of potential customers to a website”. The main thing here is that social media is bringing together millions of people in India, allowing them the chance to interact with each other and with the banks. The goal is that social media spreads awareness of the banks and also helps to create a greater acceptance of them within the Indian consumer. This same strategy could be used with our product. It’s practical that we could use various social media platforms to interact with consumers, more specifically retailers, and spread the awareness of our product and communicate the benefits of using it as well. Overall, these current trends should really bolster the confidence in the banking sector.
Online Purchasing Growing
After looking further into the consumer trends in India, it’s worth noting that the popularity of the Internet is growing at a substantial rate. Those who already had access to the internet are starting to become engulfed in it and those people who did not have access are slowly acquiring access as the infrastructure in smaller cities is improving. It makes sense that “as internet use rises at a rapid pace, so too does the uptake of internet shopping” (Vaidyanathan, 2011). According to Indian research group Juxt, there are more than 65 million people accessing the web and they estimate that roughly 80% of these “web surfers” are using it to brows for products and make purchases. Considering the size of India, this seems like a very small percentage of people using the internet to shop; however, this market is still very large and shows signs of growing. Murali Krishnan, boss of eBay India, believes that at this rate, “India could become one of the top 10 e-commerce hubs in the world by 2015” (Vaidyanathan, 2011). Mr. Krishnan also believes that India will become one of the top e-commerce hubs due to the fact that it is seeing a large growth in consumerism. The Indian people are buying more than ever. Not only are they buying a wider variety of products these days, but also they are starting to do their shopping online which is a growing trend as we have just discussed. This change in consumerism is something that our business should capitalize off of. Because the use of credit cards and online shopping are growing, small retailers and other businesses are going to be forced to purchase POS terminals to facilitate transactions online. The sole fact that credit card use is growing is reason enough for small retailers to start using POS terminals, but if they would like to remain competitive it seems wise that they also get POS terminals so that they can slowly get into e-commerce. Many Indian retailers are starting to sell online because they are able to reach a larger consumer base in the smaller cities rather than just in the metros. With Chase Paymentech, we offer POS terminals and services that allow small retailers and other businesses to handle online transactions quickly and efficiently at an affordable cost.
Counterfeit Currency
One serious issue India is facing at the moment is the production of counterfeit money and its circulation. There have been many reports that people from Pakistan and even native Indians are creating counterfeit bills and dispersing them into the economy. According to an article from the Times of India, “there has been a 400% increase in counterfeit transactions in the country” (Chakraborty, 2012). This number is disturbingly high and is something that small retailers and other businesses should be concerned with. The last thing these businesses need to be worried about is being paid in fake money. This can be detrimental to business and cause many problems. Because so many people still primarily use cash for transactions, the risk of being paid in fake currency is much higher. With the use of our POS terminals, these retailers and businesses can reduce the chances of being paid in fake currency by handling transactions electronically. If the money is in the bank and the transaction is done via credit or debit card, the business owner will feel much better knowing the transaction is secure and real. Chase Paymentech also prides itself on top of the line security and fraud protection with its POS terminals and services. Retailers and other business owners should know that their business will be safely and securely managed and protect.
V. Competitive Market Analysis
The Product
The products that we would like to introduce in India are the Chase Paymentech point of sale terminals. The two models that we would like to focus on are the Ingenico iCT250 Credit Card Terminal and the Equinox T4220 (formerly Hypercom Optimum). A point-of-sale (POS) terminal is essentially a computerized replacement for a cash register. These terminals are much more complex than the basic cash registers of even just a few years ago. The POS system can include the ability to record and track customer orders, process credit and debit cards, connect to other systems in a network, and manage inventory.
These devices were created to simplify the many facets of business. Before these systems, owners of businesses and retail stores were forced to handle transactions manually and would also have to manually keep track of inventory and other data that pertained to the overall operations of the business. These point of sale systems were created to help businesses become more efficient and to help simplify many of the daily activities. The two products that we mentioned about primarily serve the purpose of processing credit and debit cards. Chase Paymentech offers a wide variety of POS systems and terminals, but as this is a new product entering into a new market, we felt it would be best to introduce two simple models until our terminals and services catch on.
Features and Benefits
The following information was taken straight from the Chase Paymentech website. Below you will find a basic description of each terminal and the features and benefits of each.
Ingenico iCT250 Credit Card Terminal
Your customers will keep presenting new ways to pay, and you’ll need a point-of-sale terminal that can do it all without turning down a sale. With a simple design and advanced technology, the Future Proof Ingenico® iCT250 can help you take your credit card processing to a whole new level. Available in Chase blue, it includes an integrated reader that accepts payments from both contactless credit cards and smart phones. With the additional slot that allows the acceptance of chip cards, your business will be ready when the U.S. transitions to the EMV global security standard.
This next-generation device offers an all-in-one credit card processing experience: a single terminal that accepts EMV chip transactions; contactless payments (both NFC and RFID); debit and credit card swipe; and manual entry transactions. Plus, automatic remote downloading ensures that your terminal will receive software updates with no action on your part, paving the way for value-added offerings as contactless third-party apps and mobile wallets become the norm. The iCT250 is available to merchants in the retail and restaurant industries.
Features of the Ingenico iCT250:
• Support for multiple transactions: enables chip and PIN and signature-based credit and debit transactions using mag-stripe, contactless cards and smart phones (both RFID and NFC standards)
• High-speed communication with dial backup
• Certified with the Payment Card Industry PIN Transaction Security (PCI PTS) standards by encrypting customer PINs within a tamper-resistant security module (TRSM)
• Anti-glare, backlit, color display with screensaver
• 144 MB memory for value-added applications
• Tip/tab transactions and reports (for bars, salons and restaurants)
• Single cable management (to prevent tangles and clutter on the counter)
Benefits of the Ingenico iCT250:
• Saves time on both sides of the counter
• Makes it easy for customers to use their preferred payment method
• Helps further protect your customers and your business from fraud
*All information taken from
Equinox T4220
With payment processing through Chase Paymentech, Equinox® T4220 (formerly known as Hypercom Optimum) is built to meet your business needs with high-speed IP communications and dial backup. The T4220 offers optimal memory, while meeting today's payment processing security standards. Equinox's proprietary advanced IP diagnostics offer built-in failure checking that tells the user where the error occurred and then how to fix it - speeding up troubleshooting, and reducing your downtime. The T4220 is available for merchants in the retail, restaurant and lodging industries who can support an IP communication method.
Features of the Equinox T4220:
• High-speed IP communications with dial backup
• Expanded memory - 24MB - for value-added software applications
• Meets payment security standards PCI PED for integrated debit support
• Bright white, backlit LED display is easy to read, even in dimly lit environments
• Small footprint and profile uses minimal space
• Supports external PIN pad (optional)
• Supports RFID contactless card reader (optional)
Benefits of the Equinox T4220:
• Frees up phone line or fax for customer communication
• Shorter transaction time means more sales and better customer service
*All information taken from
Usage Situation
As mentioned before, these devices will primarily be used for the processing of credit and debit cards. Retailers and other small businesses will be the major owners of these devices and the Indian consumers will be the primary users as they swipe their credit cards to complete a transaction.
While both devices serve the same purpose, they both operate a little differently. The Ingenico iCT250 is classified as an EMV/Contactless device while the Equinox T4220 is classified as a Broadband/Internet with Dial Backup device. They both fall into different classifications, but they are both able to process your basic cards. Both terminals are compatible with EMVchip card technology and mobile technology. A chip payment card looks similar to a traditional card but with an embedded chip in addition to the standard magnetic stripe on the back of the card. The embedded chip adds an additional level of authenticity and holds extra user data on it. When completing a transaction with a chip card, the user will generally have to enter an additional pin to ensure the correct user is using the card. Also, they both allow customers to use their smart phone to complete the transaction. People now have mobile wallets that store their information and the user needs to do is have it interact with the terminal, confirm that you are the correct user making the payment and then the transaction is complete.
Promotion
Promoting a product like this is a bit more complicated than promoting a good that is sold directly to the consumer. We are targeting retailers so we need to figure out the best way to reach them. The main way we will promote our company and service is through personal interactions with the owners of these retailers. We will have account managers who are responsible for generating leads and then following through with them in hopes that we can acquire new clients. At the moment we are unsure of how many account managers we will have and they will be paid salary so we are unable to determine the exact cost of this promotion at this time.
The other options we thought of were television and radio advertising. In India, advertisement rates are fairly low. A “10-second spot on top FM stations such as Radio Mirchi and RadioCity costs just Rs 7,000-8,000 ($128-$146), which is generally still higher than what others can charge” (Shashidhar , 2010). In contrast, it can cost anywhere between” Rs 50,000 and Rs 1 lakh ($918.00-$1837) on a TV channel, depending on the program” (Shashidhar , 2010). Because of the great reach and low cost of these two types of promotion, we should primarily allocate our resources to these two types.
VI. SWOT Analysis
Through conducting the SWOT analysis, we determined that there is a great deal of opportunities for Chase Paymentech upon entering the Indian Market.
Internal Strengths
Existing technology to use, and previous success
Our products, the Ingenico iCT250 Credit Card Terminal, and the Equinox T4220 (formerly Hypercom Optimum) are high technology devices which can accept many types of payment by credit, debit, and also smartphone. Since this product and technology already exists, we do not have to concern ourselves with new product development.
In addition, Chase Paymentech is garnering reputation in the credit card processing industry globally. We currently serve more than 222,500 merchants with 442,500 locations. The users of our products include small business merchants who have built up relationships with us for more than 25 years. We are proven to be reliable and trustworthy by many small businesses, and it could lead to be successful when we extend our business to India.
Internal Weaknesses
New marketing, advertisement, promotions systems
The company needs to set up the new marketing strategies, advertisements, and promotions responding to the tastes of new potential customers so that we are better able to penetrate the credit card market. Also, we do not have a supporting infrastructure to start the business. We have to set up our own new credit card terminal which would definitely cost our company. There are two types of terminal we should be able to offer; wireless or wired. A credit card terminal is a type of a Point of sale (POS) terminal and the most important composition for the credit card business. Without the terminal setting up, the business cannot be even started. Nowadays, a couple of types of credit card terminals are available. Most newer models not only process credit cards, but they can also process debit cards, gift cards, checks, and so on. Some also have the ability to store data and then transmit the data over a standard telephone line when one becomes available. The remote wireless terminals can transmit card data using either cellular networks or satellite networks. As it functions as the most important part of the business, new infrastructures regarding the credit card terminal are needed in order to start the business.
No reputation
We do not have strong brand image yet in India, since we have not actually started the business. In order to introduce and let people know the service actually exists, we have to advertise. For instance, Citibank has been at a moderate level among other international banks in India because they were dedicated in advertising the bank to establish a good image. In 2011, Citibank India has launched a new corporate TV campaign focused on the bank’s brand purpose which is creating “Moments of Success” for customers. This is the first time that the bank developed a corporate campaign which focused on the Indian audience (Campaign India). As Citibank in India advertised, there should be much more effort in order to gain name reputation.
Opportunity
Trend changes
According to Hindustan Times, the articles states that the number of credit cards has risen to 18 million cards in June from 17.77 million in April (HindustanTimes). Also, compared to the same period in 2011, credit card spending has risen by 28%. It clearly explains that the consumers spending behavior changed over the time. This trend is viewed as positive and it is opportunity to enter the credit card business.
Demographic
More than 50% of India's current population of 1.22 billion is below the age of 25 and over 65% below the age of 35. About 72.2% of the population lives in some 638,000 villages and the rest 27.8% in about 5,480 towns and urban agglomerations. This indicates that more than 50% of the total population, about 60 million, can be targeted as potential customers for the credit card business. Since the credit card industry is a low-margin, high volume business in population size, India is a suitable country to start the business. In addition, the credit card market is expected to grow by 25% or 30% per year (Time Delhi). These numbers are encouraging and because there are so many people who will someday have a credit card, it would be wise to enter the market.
Tourist attractions
There are many famous world heritage sites that attract tourist from outside of the country such as Swaminarayan Akshardham, Qutab Minar, Humayun's Tomb, and Lodi Gardens. Annually, there are more than millions of tourists from all around the world visiting these attractions. Since most of these tourists, especially those from westernized countries, carry credit cards, small retailers need to have devices to accept the payments from them when they visit these places and purchase things. Since our terminals accept the credit card payments including Visa, MasterCard, Discover, American Express, gift card, debit and EBT transactions, the small business retailers would definitely benefit from our product.
Spending behavior
Nowadays, spending behavior is changing in India due to increasing disposable income, and an increasing young population. The change in spending behavior affects people to contain credit cards. More desire to spend on nondurable goods can lead to obtain credit. Availability of credit also encourages the spending. As a developing country, Indians start to consider not only the price, but also design, quality, and trendiness. The different groups in India show different spending behaviors. For instance, people in 20-24 years age group spend more on electronic, home appliances, and movies, while people in the 45-48 years age group spend more on vacations (NCAER).
Cultural Factors affecting spending behavior; festival
The statistical report shows that spending money through credit cards fell by 11% to Rs. 9,039 crore in June from Rs. 10,119 crore in April, according to Reserve Bank of India (RBI) data (Hindustantimes). However, there is cultural factor that makes prediction that the prospect on spending through credit card would increase at the end of year. "This may be a temporary aberration also because the first quarter is usually a lean season in terms of credit card spending because of no festivals," said Shyamal Saxena, GM (retail banking products) India and South Asia, Standard Chartered Bank. From October the first till the end of November throughout the country, it is the season when entire country is celebrating; Hinduism reasons. . This is the most awaited period by millions of Hindus in the country like Christmas in the U.S. It all starts with the nine day festival named 'Navaratri'. This nine day festival is celebrated for worshiping three divine goddesses, Durga (Goddess of Power), Lakshmi (Goddess of Wealth), and Saraswati (Goddess of Knowledge).
External Threat
Competition
There are already more than 50 banks issuing credit cards and POS terminal in India. Our main competitors are Citibank, ICICI, Axis Bank, Standard Chartered, SBI, HSBC, HDFC, as well as many other domestic and local banks in India. All of them are our competitors as we enter into the Indian market. We are not the only company who has recognized India as potential profitable market. Many international and domestic banks are now issuing credit card and POS terminals, and we are losing first pioneers advantages.
Of the banks and other payment processing companies mentioned above, the biggest competition we face right away is Axis Bank and HDFC. Not only are they banks, but also they are involved in the POS terminal business. This is the positioning advantage that they have over us. They are already well established brands in India, so reaching out to small business owners and retailers will be easier for them. While many banks are farming out their POS terminal business to other companies, HDFC plans to “retain its POS terminals business within the bank and grow it from within” (Shetty, 2011). These two banks also currently have the most POS terminals out in the market right now. Axis Bank currently has sold over 1.8 (180,000) lakh POS terminals and has the largest network followed by HDFC Bank who has 1.25 (125,000) lakh terminals.
We were unable to determine how expensive the POS terminals are through our competitors. What we did find however was that other terminals similar to the ones we are selling were going from $200.00 to $500.00 per unit. As our product sells for around $200.00 to $230.00, we offer a much more competitive price compared to other sellers. The other piece of data we were unable to determine was how much our competitors will charge per transaction. We are currently charging a 1.7% transaction fee per transaction. Further research has shown that the transaction fee rises or falls depending on the amount of transactions the merchant needs processed.
VII. Target market
As we are primarily involved in Business to Business operations, our target market is not any particular type of consumer but rather a specific type of business. Our main target market is going to be comprised of small retailers. There are two broad categories in the retail industry – organized retail and unorganized retail. Organized retail consists of “traders/retailers who are licensed for trading activities and registered to pay taxes to the government” (Sethi). Unorganized retail consists of “small shops, conventional Kirana shops, general stores, corner shops among various other small retail outlets” (Sethi). India is filled with hundreds of thousands of these types of stores and we would specifically like to target them. Indian retail is expected to “grow around 25% annually” and experts predict that “modern retail in India could be worth US$ 175-200 billion by 2016” (Sethi). The retail industry in India is one of its biggest, and it also ranks in as one of the biggest worldwide. As far as specific retailers are concerned, we would like to focus on the retailers that are located in the Tier-1 classification of cities. This Tier-1 ranking is associated with the Indian cities that have the largest populations. These cities include Bangalore, Chennai, Delhi, Hyderabad, Kolkata, and Mumbai. We would like to target retailers in other regions upon the success of our company; however, at the moment it is most realistic to target retailers in these cities because they are more populated and have better infrastructures.
VIII. Projections
Sales Volume
To develop realistic projections, we took a look at what current payment processing companies and banks were doing in India. We took a look at our biggest competition and found the following information. In 2011, “Axis Bank, which has over 1.8 lakh (180,000) POS terminals, has the largest network after HDFC Bank-1.25 (125,000) lakh” (Shetty, 2011). Over the next 18 months, HDFC Bank made it known that they would like to grow their POS terminals business “within the bank and grow it from 1.25 lakh to 2 lakh” (Shetty, 2011). According to this same article from the Times of India, Kohlberg Kravis Roberts & Co. L.P. (KKR) is investing resources into the POS terminal business and plans to roll out 25,000 machines a year.
Based on these numbers, our goal is to enter the market with roughly 50,000 POS terminals. We determined this number was appropriate as our brand has no recognition yet in India. The JP Morgan Chase Bank already exists in India so that helps develop our brand; however, the Chase Paymentech subsidiary will be new to the region so we feel a slow transition would work best. Every year after, we would like to follow in the tracks of KKR. We feel that for the next few years we will be able to roll out 25,000 POS terminals a year.
Revenue
We would be entering the market with two of our basic products, the Equinox T4220 and the Ingenico iCT250. Retail price for the Equinox is roughly $200.00 per unit while the retail cost for the Ingenico iCT250 is roughly $230.00 per unit. To determine the minimum revenue based solely off the sale of these terminals, we took the price of the lowest terminal ($200.00) and multiplied it by the 50,000 terminals. In the first year alone, we are looking at sales of $10,000,000 at the minimum. In the following years, if we stuck with the projections of selling an additional 25,000 terminals per year then we are looking at sales of $5,000,000 at the minimum.
We would also generate additional revenue each time one of our merchants needs a payment processed. Based off of numbers from the current website and the industry average, we would be charging about 1.7% per transaction processed. According to an article from the Times of India, “there are five to six million merchants whose monthly transactions are in the region of Rs 50-60,000 where card transactions are feasible” (Shetty, 2011). Currently, 1 Rupee is the equivalent of .02 U.S dollars. What this translates to at the moment is sales of $1,000-$1,200 a month or $12,000 to $14,400 a year. Therefore, if we have 50,000 terminals in use in the first year were looking at total merchant sales between $600,000,000 and $720,000,000. As we charge 1.7% per transaction, we would earn at a minimum $10,200,000 off of the 50,000 merchants sales for the year. Because we plan to introduce and additional 25,000 POS terminals a year, we are only going to generate more revenue.
Basic Outlook
POS terminal sales in 2013 EST. - $10,000,000
Transaction Fees in 2013 EST. - $10,200,000
Total Revenue $20,200,000
Profit
At the moment, we do not have an idea of how many employees we will need so these salary costs can’t be deducted from the revenue to find our profit for the year. What we can conclude though is that this region will be very profitable for us in years to come. The industry is rapidly growing and it is crucial that we enter now before the market for our product is saturated. As credit and debit cards become more widely accepted, more and more people will begin to use the cards to make purchases. If more people are making card purchases than our merchants need more payments processed and we in turn make more money.
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