India is traditionally a debit card market. But the surge in credit card issuance over the past decade has changed the narrative. And this growth is further accelerated by fintech players and the introduction of various product and service innovations like credit card innovations, buy now pay later (BNPL) and credit EMIs.
Meanwhile, India’s banking system reported net additions of around 1.5 million credit cards in February, up 165% year-on-year, according to brokerage firm Motilal Oswal.
Impressively, the credit card industry has managed to maintain growth despite an increase in cash transactions through UPI, which grew 97% in November 2021 to touch Rs 7.7 lakh crore.
The total value of credit card transactions is expected to exceed Rs 5,000 crore by 2027, expanding at a CAGR of 39.22% over the period 2022-27. Credit card transaction volume during this period is also expected to grow at a CAGR of around 26.43%, which bodes well for the credit card industry.
Accelerate financial inclusion
In 2015, when RBI released the Small Financial Bank Licensing Guidelines, AU was the strongest of 10 entities selected to receive this coveted license thanks to its strong foundation and proven track record.
Today, as a Fortune India 500 company and a bank for the underserved and unserved in the lower and middle classes, AU enables a convenient banking experience through many industry-first initiatives.
In a recent insightful conversation with YourStory, Mayank MarkandayHead of Credit Card Business, AU Small Finance Bank, discussed the bank’s approach to accelerating credit card adoption for the unserved and underserved and the plans they have to bring the change they promise in society.
Tackling the highly skewed ratio of credit cards to debit cards in India
Mayank pointed to two key highly skewed ratio issues in India with respect to the credit card market.
“Compared to China or the United States, credit card penetration is quite low in India. It’s barely 3% of the population. At AU, we realized that the two main reasons for this were that credit cards were primarily issued for the salaried segment, while a large number of self-employed people had virtually no presence on the right credit card instruments. credit,” he said.
“The second reason was that credit cards in India were only issued and distributed in about 20 major Indian cities. Indeed, 80% of card issuance is limited to 20 cities in India,” he added.
AU Bank solves this problem by issuing credit cards in over 150 districts currently in India, and also by offering cards to the underserved self-employed segments of the country.
“Tier II and Tier III cities are also looking for credit card instruments given the greater penetration of e-commerce. A large number of avenues have opened up for making credit card purchases, even in Tier II, III cities,” he said.
Incentives that attract new customers
“Most of our customers have received cards for the first time, and are therefore experiencing them for the first time,” said Mayankexplaining how AU Bank looked at credit cards from the perspective of these organizations and how they got rid of traditional mindsets to create incentives that truly appeal to new customers.
“We understand that the large percentage of our potential Level II, III and IV users travel largely by train. However, many traditional credit cards only offer airport lounge access. There was nothing that strongly appealed to this segment, so we brought in rail shows for them,” he said.
“Now, in several stations, there are rail lounges that our customers have access to and appreciate, in addition to the access to airport lounges offered by traditional credit card players,” he added.
Mayank also explained how crucial it is to create unique first-time features that complement the needs and wants of underserved segments across all age groups, adding that these should go beyond offerings. me too and often predefined.
“Seeing that the younger generation in particular has a penchant for buying electronic devices from online portals these days, we offer them a device protection plan to help them secure it. For example, if a customer buys a mobile or an iPad, they will get one year free device protection for the screen,” he says.
Leveraging digital adoption in rural and semi-rural towns
As India’s digital adoption story now shifts from metros to Tier II, III and IV cities and also from urban to rural, AU Bank is starting to see incredible opportunities emerging with credit and debit cards. other financial services, particularly in the wake of the adoption of e-commerce and related services in these areas.
“We are a bank with core operations in the Tier II and III markets, and we have a lot of numbers there. In these markets, not everyone can buy cash on delivery or by debit card,” said Mayank. As digital adoption increases tremendously, we are often the first to offer a digital instrument to users in these markets,” he said.
“Customers come to our branches and request credit instruments, as it is the most convenient instrument to use on these portals,” he added.
Credit cards that stand out from their peers
Mayank also talked about how challenging the status quo in the credit card market was a key factor in its growth story.
“Despite claiming to be customer-centric, banks tend to fix everything for a customer in the credit card industry. There are predefined fees, predefined features, predefined rewards that offer little flexibility to customers,” he said.
“We have customer-centric products where we give customers the ability to choose what they really want. We will bring an unprecedented level of flexibility and choice to the marketplace and I tell you this is going to be a game changer for the credit card industry,” he added.
The Future of AU Bank Credit Cards
Mayank was particularly passionate not only about the credit market in India, but also about credit opportunities in rural areas and small towns of India.
“The Indian middle class segment is growing every day, with extremely interesting figures. And when the middle class segment grows, your demand for credit increases. And when the demand for credit increases, the instruments that provide credit limits will certainly increase. We look forward to playing a key role in this growth and want every Indian to become a digital savvy shopper,” he said.
“India will see a lot of digital adoption in the next 10 years. We see that the credit card industry will also grow with a CAGR of 20%. We see a lot of opportunities that can be easily seized by AU Bank in the coming years, especially in the area of credit,” he added.