India's largest bank and Hitachi are teaming up to enter the country's booming digital payments space

• India's largest bank, the State Bank of India (SBI) and Hitachi Payments are embarking on a joint venture that will take on digital payments and card acceptance platforms.
  
• Combining the individual strengths of both, the venture will deliver payment services to the customers and merchants on Quick Response (QR) code acceptance, Unified Payment Interface (UPI) and e-commerce businesses.
• Hitachi manages over 70% of SBI’s current network and this joint venture will further strengthen their partnership.

The State Bank of India (SBI), India's largest commercial bank, signed an agreement with the Hitachi Group (Japan) embarking on a joint venture to establish digital payments and a card acceptance platform in the country. While the bank will have a majority stake in the proposed venture, according to its press release, Hitachi is planning to invest 26% in its subsidiary SBI Payment Services.

Both parties will now be proceed to apply for regulatory approvals.

In India, SBI's customer base expands to nearly 420 million people and is the largest merchant acquirer in the market in terms of terminals through its subsidiary, SBI Payment. So far it has managed to deploy 1.96 million merchant payment acceptance touch points across the country.

But, looking to shift that burden, SBI has initially shortlisted three companies for the joint venture — Hitachi, Worldline and First Data Corporation. Whichever company got shortlisted would then be in-charge of deploying credit card swipe machines.

According to SBI’s annual report for the FY18, SBI Payment Services’ total balance sheet equity, including surplus and reserves, was reported to be ₹38 million while the total balance sheet assets were at ₹56 million. The joint venture blends the distribution network of SBI with Hitachi’s technology and services including big data, artificial intelligence, analysis and digital payments. The venture will deliver payment services to customers and merchants with Quick Response (QR) code acceptance, Unified Payment Interface (UPI), mass transit sector and e-commerce businesses.

Rajnish Kumar, the Chairman of SBI, said that the penetration of payment acceptance infrastructure is still low, at 2500 Point of Sale (PoS) per million. And with the new joint venture, the bank is hoping the numbers will rise.

What's in it for Hitachi?

Hitachi is all set to expand its footprint in the Indian market by contributing to the development of digital payments services’ business via digital payments platform in order to ensure quality and better convenience. The venture will combine the individual strengths of both subsidiaries.

In a conversation with Economic Times, Hitachi India’s Managing Director Bharat Kaushal stated that this mutually benefitting partnership with the financial giant SBI will allow the company to widen their footprint across India.

Hitachi manages over 70% of SBI’s current network and this decision to create a joint venture is only going to strengthen the partnership. Hitachi Payments manages over 55,000 ATMs in India and has been providing deployment, management services and handling SBI’s digital acceptance payment network since 2011.