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Our Bureau

Chennai, Feb. 23 Indian Overseas Bank on Monday announced its formal entry into the “merchant acquisition” business. In association with the Australia-headquartered Banktech, IOB will give card swipe devices to merchant establishments (such as shops and restaurants) so that IOB’s machines are used to swipe credit and debit cards of the customers.

When a shopper’s credit card is swiped on an IOB machine, the bank gets a commission. If the credit card is also one issued by IOB, the commission would be more.

According to the agreement with Banktech, 67 per cent of the commission earned will go to the Australian company, which supplies the machines and maintains the technology platform.

At a press conference here, IOB’s Executive Director, Mr G. Narayanan, said in 2009-10, the bank expects to earn Rs 3 crore from this business. However, there would be several intangible business spin-offs, such as the opportunity to get merchant establishments as customers.

IOB got into the ‘cards business’ three years ago. It has been giving its customers debit cards, which also double as credit cards when the spend on the card exceeds the balance in the customer’s account. So far, the bank has issued 11.40 lakh cards.

However, when these cards are swiped on the machine provided by another bank, it is the other bank and not IOB that gets the biggest part of the commission that the merchant establishment pays.

IOB estimates that each year its cardholders spend about Rs 210 crore using the cards. The bulk of the commission goes to other banks. IOB’s entry into ‘merchant acquisition’ will change that.

More Stories on : Credit Cards & Debit Cards | Public Sector Banks

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