Banks are getting bullish on credit cards as festival season approaches, launching several new cards and dangling offers at a time when customers are traditionally loosening their purse strings.
While lenders remain cautious about unsecured loans, they are making calculated bets on credit cards. Besides market leaders such as SBI Card and HDFC Bank, which are launching new cards, banks that have not offered credit cards until now are also entering this extremely competitive market. Many lenders focus on their existing customers for whom they have sufficient historical data.
The Kochi-based private lender Federal Bank entered the credit card business in September in association with the Visa card network. A few days later, the lender launched another card, this time with the local RuPay card network.
âWe said our credit cards would be an existing product to the bank (or a product for existing customers). The reason is that a few years ago we said that our foray into the unsecured business would be with existing clients, and that’s what we did in our personal lending business, âsaid Shyam Srinivasan. , Managing Director of the Federal Bank, in a recent interview.
As banks have realized the importance of tapping into the young population and getting them to buy into an ambitious product like a credit card, they are now tweaking their offerings.
âIndia has traditionally been a debit card market. However, the growth in credit card issuance over the past decade has changed that narrative, and credit cards are widely used, âPwC said in a note in August.
According to the note, this growth is being accelerated by various products and services offered by financial institutions, and these products are increasingly used by customers, especially the Millennial population.
According to the Reserve Bank of India (RBI), the total number of credit cards stood at 63.4 million at the end of July.
On September 29, India’s largest credit card issuer, HDFC Bank, announced the overhaul of three of its existing cards to offer more to its customers as it seeks to regain lost market share in the over the next three to four quarters.
The bank had lost ground due to an embargo by the Reserve Bank following malfunctions in its online banking services.
Barely a month after the ban was lifted, HDFC Bank issued more than 400,000 credit cards until September 21.
âI think more responsible financial institutions entering the credit card business are welcome as it will help grow the market. As I said earlier, a whole new set of customers are coming in, such as millennials and people who are new to the workforce but are digital savvy customers and are an important target segment for them. cards, âsaid Parag Rao, group leader for payments, consumer credit, digital and IT banking, HDFC Bank.
The bank craze also comes at a time when Buy It Now and Pay On (BNPL) products have caught the attention of many customers, especially young people.
BNPL essentially offers two weeks of interest-free funds to small borrowers.
While some see it as a competitor to credit cards, others see these products as the first step in assessing a borrower’s creditworthiness.
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