Digital push driving credit card segment's growth in India

We are not in top 10, but that's a very superficial way of looking at what BFSL has achieved in the last 2.5 years or so. We have doubled our customer base twice in this period, crossing half-a-million customers recently, from just about 125,000 in March 2018

The share of millennials or the young population between 18-25 years of age is another significant factor driving credit card growth. Credit cards are now being used to make payments for utility bills, educational expenses, healthcare, insurance, government payments

Credit card business is the one significant area the banks have benefited the most during the Covid-19 period. Taking a note of it, BOB Financial Solutions Limited (BFSL), the issuer of BOB Credit Cards, has rolled out an ambitious plan to break into top five in the plastic card space in the country within next few years. "Covid-19 pandemic forced credit cardholders to go for online or e-commerce transactions, thereby opening up even more avenues for credit card usage," said Shailendra Singh, MD & CEO, BOB Financial Solutions Limited, in an exclusive interview with Bizz Buzz

The Indian credit card industry is expected to grow at a CAGR of more than 25 per cent during 2020 – 2025. What will be the contributing factors for this?

The push for digital payments, both by the governments and RBI, is a key factor. This is having a positive impact both on the issuance as well as the acceptance side. Customers who were hesitant towards plastic money are made aware of the safety and convenience of digital modes of payment and are adopting them at a faster pace. Customers also have several points of acceptance, both physical and online, for using their credit card. The share of millennials or the young population between 18-25 years of age is another significant factor driving credit card growth.

Credit cards are now being used to make payments for utility bills, educational expenses, healthcare, insurance, government payments in addition to the traditional purchases of grocery, electronics, apparel and fuel. The Covid-19 pandemic migrated most credit cardholders to online or e-commerce transactions, thereby opening up even more avenues for credit card usage. The adoption of Buy Now Pay Later or Equated Monthly Instalment (EMI) is also contributing to the growth in usage of credit cards.

An RBI data says that the number of credit cards in India stands at 58.8 million as of September 2020. Yet there are only 2.2 credit cards for every 100 people in India in 2017 as against 320 in the USA. How long will it take to reach that level?

While the two countries are not comparable, especially not for credit card penetration, we should look at the encouraging trend as captured in the growth estimates and key contributing factors mentioned above. In terms of numbers, the CreditScape study estimates an additional 350 million customers who can be given a credit card in the next 15-20 years. That's a growth of seven times from where we are now.

How do you see the surge in default by credit card users due to the lockdown which has resulted in job loss, pay-cuts and closure of units?

There was initial scepticism on the surge in defaults owing to the lockdowns and impairment in normal economic activity. However, with the measures taken by the Govt of India and the lockdown easing in the last few months, the repayment levels have reached very close to the pre-Covid levels.

What is the impact of NPAs in your company due to the lockdown?

There were initial stress levels in the entire unsecured lending landscape across the financial institutions, but as the situation has started to ease out over the last few months, we expect the NPA levels to be restored to normalcy.

BOB Card has been raining offers in the festival time. What is its impact?

We do not believe in a burst of tactical offers during festival time. For us, customer engagement is key and we adopt a three-pronged strategy to ensure the same namely (a) product features that reward the cardholder every time the card is used, (b) long-term or 'always on' offers with strategic partners in different spend categories and finally (c) the festival or occasion specific offers.

The expected impact of all initiatives is an increase in customer engagement, reflected in higher ticket size as well as frequency of spends. The impact of our three-pronged strategy has been very encouraging till date and we will continue to build upon the same.

Are you also looking towards ensuring resolution wherever feasible for retail loans?

These are times where we need to show compassion and empathize with our customers who would have continued enjoying our card services but for the Covid emanated difficulties in their cash flows. We are extending all possible avenues for them to ease their repayment burden, trying to sync them with the revised cash flows wherever possible. Customers are also well aware of their obligations and any potential impact of non-repayment to their credit scores.

Your peers have tied up with e-commerce players like Amazon and PayTM for increasing. Are you also looking at doing something in that direction?

We have always mentioned that while the large customer base of Bank of Baroda is our primary target segment, we are always open to partnerships that will prove of strategic benefit to both BFSL as well as the partner. We are closely watching the space and have also seen interest from prospective partners.

Currently BOB Card is ranked beyond top five players active on the space. By when it will join the group of top five?

You're right that we are ranked beyond Top 5. Actually, we're ranked beyond Top 10, but that's a very superficial way of looking at what BFSL has achieved in the last 2.5 years or so. We have doubled our customer base twice in this period, crossing half-a-million customers recently, from just about 125,000 in March 2018.

From being a member of the bottom half of issuers just 2.5 years ago, we consistently ranked amongst the Top 10 issuers on a monthly new issuance basis during FY 19-20. Our immediate target is to further improve the ranking on incremental issuance and break into the Top 5 on monthly incremental issuance. Joining the Top 5 club in terms of overall customer base is our stated aspiration, and we are all working towards the same.

What is the roadmap for the same?

We have identified distinct customer segments and opportunities within BoB and outside and have already started working with the various departments of BoB and have started discussions with select partners.

As you may be aware, we recently celebrated our 27th Foundation Day. We love to call ourselves a 26-year old start-up, primarily to define the current appetite for growth, innovation and differentiation. BFSL is buzzing with activity, in spite of the challenges brought about by the pandemic.

We know that to fulfil our aspirations, we will have to grow much faster than the industry. We are also aware that technology is an area where we have to play catch-up with competition, and we have set many balls in motion with the key objective of achieving technology parity with leading issuers at the earliest possible.

We have also started deploying a fully digital origination platform that will create seamless Do It Yourself (DIY) and assisted origination journeys for customers interested in BoB Credit Cards. Digital origination is the need of the hour, and its relevance has further increased during the current environment brought about by the pandemic, where zero or low touch solutions are preferred across all customer journeys. Our digital origination platform will also enable assisted journeys at BoB branches and other points of presence and will also offer seamless API-based integration with partners, for cobranded and acquisition alliances in the very near future.

BoB card has already forged partnership with institutes like ICAI and ICMA. Any other such alliance in the offing?

We are privileged to have partnered thre eminent professional institutions of the country. We have launched 3 cobranded Credit Cards in partnership with the Institute of Chartered Accountants of India (ICAI), the Institute of Cost Accountants of India (ICMAI) and the Institute of Company Secretaries of India (ICSI). These are offered exclusively to chartered accountants, cost & management accountants and company secretaries respectively.

The response to these cobranded cards has been very encouraging. We are looking for and open to more such alliances with professional and educational institutions and will share whenever we finalise them.