Indian consumers have never had it so good. The soiled notes are definitely out. Plastic money is in! Carrying cash is no more `a pain in the neck' as consumers are relying more on the `plastic card' which gives them money on credit.
Credit Cards have finally arrived in India. The card industry which is growing at the rate of 20% per annum is flooded with cards ranging from gold, silver, global, smart to secure….the list is endless. From just two players in early 80s, the industry now houses over 10 major players vying for a major chunk of the card pie.
Currently four major bishops are ruling the card empire---Citibank, Standard Chartered Bank, HSBC and State Bank of India (SBI). The industry, which is catering to over 3.8 million card users, is expected to double by the fiscal 2003. According to a study conducted by State Bank of India, Citibank is the dominant player, having issued 1.5 million cards so far. Stanchart follows way behind with 0.67 million, while Hongkong Bank has 0.3 million credit card customers. Among the nationalized banks, SBI tops the list with 0.28 million cards, followed by Bank of Baroda at 0.22 million.
The credit card market in India, which started out in 1981, is on the verge of an unprecedented boom. Between 1987 and 2000, the market has virtually grown to over 3.8 million cards with almost 25-30 % growth in new cardholders.
SBI, one of the late entrants in the card market, has managed to grab over 8 per cent of the market share from the bigwigs like Citibank and Standard Chartered Bank. The bank's credit card business has grown by 8 per cent over the last two years. According to bank officials, SBI's card issue so far is to the tune of 0.28 million which is expected to cross the 1 million mark by the fiscal 2002. The bank is also planning to launch debit card, global card, gold card and corporate card shortly.
In a bid to tap the lower middle class segment, SBI is currently sharpening its marketing skills for the launch of `secure card', aimed at its fixed deposit clients. The bank will be launching this new product at five of its branches at Delhi, the country's capital within a fortnight. With the launch of `secure card', SBI will become the first bank to tap the lower middle class segment. By the end of the fiscal 2000, the bank is expected to take the secure card to over 36 centers throughout the country.
The bank is putting its best foot forward to compete with global card majors like Citibank and Standard Chartered Bank. The global bigwigs have already established themselves as the `bankable brands' in the metros. However, in a bid to move to greener pastures, they are trying to tap the co-branded card market which has vast potential for growth. Citibank, which is leading the card empire recently launched a co-branded credit card in partnership with Indian Oil Corporation. The card will offer its members reward points on every international spend which can be redeemed for free fuel in India.
Thus in a scenario where almost the entire card market is dominated by the phirang banks, why the SBI-GE Capital subsidiary gung-ho about slicing off a major chunk of the card market?
Expanding the Card Pie
There may be 3.8 million cards today. But the catch is that there are not 3.8 million cardholders - one person has multiple cards. This makes the job of selling cards all the more difficult since everybody is targeting the same market segment. What's more, multiple card ownership ends up
splitting card spends.
If SBI ends up targeting the same multiple card customer-base, then it is unlikely to make much headway. Reason: Citibank and other foreign issuers like Hongkong Bank and Standard Chartered Bank have already embarked on a massive marketing campaign to boost card usage. Thus to move ahead of these phirang banks, nationalized banks like SBI and BoB are targeting virgin territories. These banks are taking their products to smaller townships in Uttar Pradesh, Andhra Pradesh and Orissa including others to widen their client base.
Even in a city like Mumbai, with an adult population of 7 million, card ownership is barely 2.5 million. Now, SBI is perhaps best poised to geographically expand the existing credit card base and drive up penetration. Its 8,800 branch network with an almost 100 per cent geographic coverage, covers almost 25% of the bankable population of the country. SBI is banking heavy on direct mailing exercise aimed at its existing database, and bypassing the direct sales model, adopted by the foreign banks.
| Banks |
Card Issue
(31st March 2000) |
| Citibank |
1.5 m |
| Standard Chartered Bank |
0.67 m |
| HSBC |
0.30 m |
| SBI |
0.28 m |
| ANZ Grindlays |
0.26 m |
| Bank of Baroda |
0.22 m |
| others |
0.57 m |
Homing in on the target
Currently, there is lack of awareness among potential cardholders, which is likely to stifle card growth. Most of the banks are relying on freebees and bundle of services like free accident policy, special shopping offers, purchase protection and add-ons like additional cards for family members of the cardholder to woo customers. The smart ones like HSBC are offering very high credit limit to tap customers. Last month, HSBC launched `Maha' card `with jyada power' which offer customers 25 % higher credit limit than the limit on any other credit card held by the cardholder.
In order to track the 4 million potential customers presently untouched by the `plastic money' is immense. The only solution is to expand geographical coverage, which is tricky for the simple fact that Visa and MasterCard have distinct skews towards metros. Only banks, which penetrate the Indian countryside, will be able to stand the test of the time. For present, consumer is definitely the king!
