MUMBAI: India has become the 13th largest non-cash payment market globally, says a Frost & Sullivan report.

"India is currently the 13th largest non-cash payment market in the world with a high potential to grow significantly as more merchants install POS terminals and accept card payments," Director, Automation & Electronics at Frost & Sullivan, Niju V said.

"Despite the high consumption volumes, there is very minimal local manufacturing or assembly activity," he said.

While local manufacturing is restricted to just local assembly, we are highly reliable on imports for the entire electronics part in the product, he added.

"The cost of investment involved in component manufacturing and also the Euro Master Visa (EMV) certification acts as a huge hazard for local manufacturers to explore this option," Niju said.

POS (Point of Sale) terminals shipment volumes are expected to grow to 11 lakh units by 2015 from 8 lakh units in 2013, growing at a CAGR of 17.2 per cent, the report said.

In 2013, credit, debit, and other electronic payments grew at a rate of 35 per cent from the previous year in terms of payment transactions, the report added.

Almost 80 per cent of the retail market does not have POS installations to offer card-based payments. The use of plastic money is still nascent and the conversion rate is very high which acts as a huge opportunity for POS installations, the study said.

Further steps to encourage the use of plastic money will help to create awareness amongst the unbanked rural population (which is about 60 per cent) to have banking facilities and hence own a transaction card, the study suggested.

Reduction in sales, VAT and excise duty would attract more manufacturers to consider local manufacturing. EMV certifications, which are a mandate for POS terminals authorisation incurs significant cost and is apparently a roadblock for local manufacturers, the report said.

This development has created the need for an expansion of a national switch like NPCI (National Payments Corporation of India).

The expansion will act as a large clearing house and will abrogate the current VISA/Master/Maestro certifications thereby reducing the cost for local POS terminal manufacturers, the report added.