Currently, co-branded credit cards have a market share of 12-15%, according to the report. Data from the Reserve Bank of India (RBI) shows that there are around one million credit cards in circulation in the country.
The RBI does not disclose the market share of co-branded cards.
Co-branded credit cards are those in which the bank is the card issuer and a different brand is the customer acquisition channel. Among the most popular co-branded credit cards in the country are: Flipkart and Axis BankAmazon and ICICI Bankand Swiggy and HDFC Bank.
“We have seen a higher activation rate and higher spending rate on co-branded credit cards, and customer engagement with big brands is strengthening. Overall, these factors are contributing to a faster growth rate of these cards compared to traditional credit cards,” said RV Ramanathan, CEO of Hyperface.
Hyperface runs a technology platform that enables banks and brands to offer digital lending programs.
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The report notes that credit cards are emerging as the most popular payment mode for Indian household consumption expenditure. The use of credit cards as a payment mode has doubled from 5% of total personal consumption expenditure in FY21 to an estimated 10% by FY24, it notes.Read also |How fintech startups are tackling the bleak credit card landscape
According to the report, relevant rewards, strategic partnerships and exclusive agreements will drive co-branded credit cards to grow at a CAGR of 35-40%, compared to the 14-15% growth rate of regular credit cards.
“In the credit card business, they make more money on riskier loans, but excessive risk will ruin the accounts, so banks will have to tread a fine line between risk and rewards for their credit card business,” Ramanathan said.
The report also found that activation rates for co-branded cards are 70% compared to 50% for their traditional peers, and in terms of average spend, these cards are 1.2 times higher than traditional cards.
The report also noted that 75-80% of co-branded cards are issued through e-commerce partnerships.
While the overall co-branded card market is showing positive signs, the central bank has tightened regulatory rules around the business.
From stricter data security norms to mandatory disclosure to customers and restricting the co-branding partner’s role to marketing and customer acquisition, the RBI wants to manage this sector with a tight grip.
“The understanding is that the regulator does not want to see risk sharing or outsourcing in this business. E-commerce players or travel companies are ideal co-branding partners as they are focused on acquiring new customers, and that will continue to grow,” Ramanathan said.
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