FSS plans point-of-sale outlet binge

Financial Software and Systems (FSS) has entered the business of acquiring merchant outlets for its member banks. In the first phase, FSS has begun deploying merchant outlets for three major players.

By December 2006, it plans to roll out at least 10,000-15,000 point-of-sales outlets, with an investment outlay of Rs 3.5-4 crore.

On the company's strategy, a senior FSS official said, "We would be deploying a region-wise strategy by selecting merchant establishments for banks having a sizeable presence in the chosen states." In the current scenario, only ICICI Bank and HDFC Bank are seen to be the most active in the merchant acquiring business.

"We are in talks with other member banks. As part of this model, we will be providing banks with infrastructure for setting up the terminal and network. We will also look into logistics and back-end settlement procedure of the terminals," the official said.

Typically, banks find it cumbersome to traverse across the country to spot potential merchant establishments where they could set up their POS machines.

As against this, having a third-party service provider identifying outlets for banks would not only lower costs for the bank, but also make the interchange fees into a percentage-based structure instead of a fixed rate, say bankers.

According to a public sector banker, "with both the Centre and the Reserve Bank of India urging banks to deliver farm credit and priority sector lending to farmers via credit cards, it becomes all the more imperative for banks to have a wider footprint of merchant establishments, especially in tier-II and tier-III cities."

The FSS member banks net includes state-owned players like the SBI, Andhra Bank, OBC, et al and private banks such as UTI Bank, IndusInd Bank and HDFC Bank.

Players expected to join the FSS network in the next couple of months are Dena Bank, Bank of India and Union Bank.

In recent times, it has been observed that most players in the credit card space such as Citibank, HSBC and ICICI Bank are ramping up their POS chains.

Having a larger number of own POS terminals ensures a fee earning stream for banks, irrespective of whether the card swiped belongs to the same bank or to another bank.

The total base of POS terminals is expected to increase by approximately 60 per cent in a couple of months, taking the total figure to 3.2 lakh terminals.