The Emergence Of Co-Branded Credit Cards In India

 The credit card landscape experienced a significant shift in 2023, particularly in India, as substantial growth and evolution marked a pivotal period in the industry's trajectory. The sector witnessed notable transformations driven by shifts in consumer preferences and economic dynamics, leaving an indelible mark on the market.

A Surge In Credit Card Usage

According to the Reserve Bank of India (RBI), credit card usage in India experienced a remarkable surge, reaching a historic high of Rs 1.78 lakh crore in October 2023. This surge, fueled by robust consumer activity during the festive season, is indicative of a broader trend in the market.

Projections suggest that the number of credit card users in India could reach the 100 million milestone by early 2024, underlining the industry’s significant expansion.

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Digital Payments And Credit Cards

The industry’s expansion is intricately linked to the burgeoning digital payments ecosystem. With the adoption of digital transactions by more merchants and service providers, credit cards have gained widespread acceptance due to their convenience.

Factors such as the overall increase in disposable income, the tech-savvy preferences of millennials and Gen Z for digital payments, and the thriving e-commerce sector have significantly propelled credit card transactions.

Key Trends Shaping the Market

As the industry continues to evolve, several key trends have shaped the market landscape, fueling its growth in the recent year.

Unified Payments Interface (UPI) Integration

The UPI on credit cards is a significant regulatory move that complements the rise of contactless payments. This advancement enables customers to make transactions without depleting their bank account balance and or having to carry their physical cards. Consequently, this not only enhances convenience for buyers and sellers but also minimizes the risk of fraud and loss at the same time.

Tailored Solutions By New-age Banks

New-age Banks are playing a pivotal role in the credit card surge by offering tailored solutions to diverse customer bases. These customized cards cater to specific needs and preferences, enhancing the appeal of credit cards in the market.

Co-branded Credit Cards

The rise of co-branded credit cards, developed in collaboration between issuers and major merchants across various product categories, has added a new dimension to the credit card landscape. These partnerships often come with exclusive rewards and benefits, attracting a broader consumer base.

Entry Of NBFCs And FinTech Firms

Non-Banking Financial Companies (NBFCs) and FinTech firms have entered the credit card space, collaborating with credit card issuers through co-branding partnerships. This collaboration has not only expanded the reach of credit cards but has also introduced innovative features and technologies to the market.

Regulatory Focus On Security

The regulator is focusing on safeguarding consumers from fraud and misuse of credit cards. This emphasis on security and transparency has built trust among users, contributing to the increased adoption of credit cards.

Also Read: MD Abhay Bhutada Provides Glimpse of Poonawalla’s Co-Branded Card Strategy in Q4

Technology And Sustainability

Organizations are enhancing IT capabilities to meet evolving challenges and fortify data security. Credit card companies are integrating sustainability, diversifying leadership, and enhancing governance transparency. Issuers are improving applications to meet customer expectations for superior mobile experiences. Additionally, credit issuers are exploring new credit risk models beyond traditional ratings to serve a broader customer base.

Abhay Bhutada's Strategic Move

Co-branded credit cards are a collaboration between a financial institution, like Poonawalla Fincorp, and a business or brand. The advantage? You get a card that not only facilitates regular transactions but also comes with perks specific to the brand. Poonawalla Fincorp, led by Abhay Bhutada, is gearing up to launch co-branded credit cards in Q4 FY 2023-24. With the approval from RBI, co-branded credit cards will be an addition to their financial services. Let’s see how the introduction of co-branded credit cards will help Poonawalla Fincorp.

Why Co-Branded Credit Cards?

When you use a co-branded card, you unlock exclusive perks tied to the partnering brand. This collaboration results in giving rewards, discounts, or cashback options whenever you buy something from the partnering brand. For example, if you have a co-branded credit card for a specific airline, you might get some discounts while booking your next flight with that airline. It’s essentially turning your credit card into a customized experience, making your transactions a bit more rewarding and aligned with your preferences.

Abhay Bhutada's Vision

In a recent statement, Abhay Bhutada, MD of Poonawalla Fincorp highlighted the significance of launching co-branded cards. He stated that the co-branded credit cards will be a welcome addition to their product offerings, complementing the existing product basket. With the increased use of digital payment, co-branded credit cards will make Poonawalla Fincorp an active participant in the payment ecosystem.

Two-Fold Strategy: Existing And New Customer Focus

According to Abhay Bhutada, the strategy for co-branded credit cards is two-fold. Firstly, it involves offering the cards to the existing customer base. This move aims to enhance customer loyalty. It will also provide additional value to those already availing of Poonawalla Fincorp’s services.

Secondly, the co-branded credit cards will be presented as a bundled offering for new customers. It’s not just about attracting new customers, it’s about offering a seamless financial experience from the very beginning.

Transparency As AA Core Value

One standout aspect of Poonawalla Fincorp’s approach is its commitment to transparency. Abhay Bhutada emphasizes that they will stick to their value proposition of ‘transparency’ in all offerings to their customers. By transparency, they mean that there will be no hidden charges.

By doing so, they want to stand out for their clear communication and financial openness. This also ensures that every cardholder understands the terms without any unwelcome surprises. It’s a simple yet crucial approach, providing customers with a financial experience devoid of the usual complexities of finance and money.

Also Read: Abhay Bhutada Shares Insights on Poonawalla Fincorp’s Long-Term Objectives

Conclusion

As Poonawalla Fincorp plans for the Q4 launch of co-branded credit cards, it will be exciting to see how they get integrated with their digital payment systems. Abhay Bhutada’s strategic move reflects not just a business decision but a clear vision for a more transparent and customer-centric financial future. In the ever-evolving landscape of credit cards in India, such initiatives are vital for enhancing customer experience and driving financial inclusion.

In another development, IIFL Finance could be the next in line to unveil a bank tie-up for a co-branded credit card, with IIFL Finance MD Nirmal Jain saying the company is “exploring co-branding partnerships with banks” in a recent interview with BusinessLine. Non-banks have opted for the route given the reluctance on RBI’s part to give such a license and also because credit cards are harder for them to monetize given the lack of liability options such as deposits.