The following are the major opportunities and market trends which are driving growth in the Indian POS
terminal market:

Growth in retail stores: The retail sector in India is one of the top contributors to the economy and a key driver
of growth. The demand for POS terminals is linked to growth in the retail sector as the increase in the number of
new stores and in the scale of existing stores will generate greater demand for POS terminals.

Increasing global demand: The global market has witnessed a consistent demand for POS terminals, largely
due to the increase in payment activities, business expansion and the increase in disposable income. Global POS
manufacturers have been able to ensure the required supply of a variety of products for various types of
merchants through their mega-sized production facilities.

Lower acquisition cost: The business model for POS terminals is largely service-based, where merchants must
pay charges for each transaction above a certain limit. Initially, some service providers charged a device cost or
deposit from merchants but of late, the devices are given free to merchants and commission is charged on
transactions. Such lack of an upfront cost has encouraged merchants to keep multiple POS machines.

Convenience: Digital payments offer convenience by saving time and labor. While cash payments provide a
suitable alternative to aid the informal or parallel economy, digital payment allows institutions to fix the
problems of traceability and security. Further, continuous effort from the Gol has allowed easier and quicker
transactions with less physical contact in light of the COVID-19 pandemic, which is a key driving force behind
the digital payment domain.

Value Added Services: Payment service providers (“PSPs”) are continuously looking for partnerships with
various merchants to improve their platform. Thus, VAS are a result of such partnerships, where the end-users
are offered additional services through the merchant or service provider in partnership with PSPs. Such
partnerships enable payment gateways to get immediate access to the agility and flexibility demanded by their
merchants. As a result of the large variety of VAS brought by these partners, the nature of the payment gateway
model is changing. Payment service providers are continuously promoting their offerings, leading towards an
increased merchant “stickiness,” furthering their landscape in the Indian market.

Policy support: MDR charges limit POS adoption among small to medium-sized merchants. To push home-
grown payment platforms, the Gol recently waived MDR charges for transactions done through RuPay cards
and BHIM UPI.

India’s POS Terminal Market Size

During the onset of the COVID-19 pandemic, a demand-supply gap was witnessed in India’s POS terminal
market, which created a shortage of POS terminal devices, in a largely import-based market. Therefore, POS
device companies have accelerated their pace of hardware production to meet the rising demand for these
machines.

A change in customer buying patterns post demonetization is evident as the number of POS terminals grew by
approximately 82% in from financial year 2016 to financial year 2017. In the aftermath of demonetization, the
Ministry of Finance announced incentives to promote the digital and cashless economy, which included
discounts on fuel payments made through digital means, removal of service tax on MDR for low-ticket
transactions, and financial support from the National Bank for Agriculture and Rural Development for rural
deployment These incentives, combined with the effect of demonetization, led to significant expansion of the
POS and card industries. With an overall growth of approximately 27.7% CAGR in the last five years, there has.
been significant acceptance and adoption of POS terminals in the country. It is estimated that the POS terminal
infrastructure has more than doubled in the past five years.

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