Indian banks and the leading companies from the startup ecosystem have joined hands to improve access to credit and further expand the fast developing credit card ecosystem in India. Recently, Flipkart and Axis Bank partnered to launch a cobranded credit card. A similar partnership was announced between Amazon-ICICI; GoIbibo-ICICI; Ola-SBI; BigBasket-DBS bank among others earlier this year.
A cobranded card is a credit card that a retailer of consumer goods or services issues in partnership with a particular credit card issuer or network. Often bearing the logos of both the credit card company and the retailer, co-branded cards earn merchandise discounts, points, or other rewards when used with the sponsoring merchant, but they can also be used anywhere the cards from that network are accepted.
For some time, the Indian government, retail organisations and ecommerce players have been putting their heads over discussions around the validity of excessive discounts offered by the ecommerce players. Launching cobranded cards seems to be an alternative for the ecommerce companies to continue extending benefits and luring the customers.
“It’s more like redeeming miles on an airlines card. None of the rules are being flouted as these cashbacks are under the account of the bank and not the cobrand (Flipkart),” said Sanjeev Moghe, head of cards and payments at Axis Bank to ET.
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The credit card ecosystem in India is growing at a fast pace and holds immense promise with regards to penetration and acceptance in many areas including ecommerce, travel, retail, payments and more. While most Indians have accessed some form of informal credit, there are only an estimated 49 Mn credit cards in circulation.
Estimates from CIBIL suggest that while there are some 220 Mn credit-worthy Indians, a full one-third of them have not yet been tapped by formal financial institutions. Further, only 72 Mn of this base is considered ‘credit active’, having a live account with a bank or lending body.
‘New India’, wants the best of everything – be it quality, choice, service or convenience and we plan to tap these market segments, with smart deals and benefits that have been worked out keeping in mind the myriad aspirations of the new Indian customer,” said Amitabh Chaudhry, MD & CEO, Axis Bank.
Sudipta Roy, General Manager & Head – Unsecured Assets & Cards, ICICI Bank further shared that India is now witnessing two distinct consumer trends. One, millions of Indians are now making purchases for most of their requirements online. Two, customers are looking for richer reward propositions that provide them flexibility in redemption.
“We believe that this compelling and best-in-class customer offering (cobranded creadit card) will contribute largely to the growth of the Bank’s credit card portfolio.”
As the industry undergoes a digital transformation, cobranded credit cards will certainly push for a unique payments experience alongside several best-in-class benefits for users as well as open doors of opportunities for Indian startup ecosystem as a whole.
Not to mention, the unicorns will be the first one to ride with this wave of transformation. “With over 150 Mn digital-first consumers on our platform, Ola is targeting 10 Mn Ola Money-SBI Credit Cards to be issued by 2022,” said Bhavish Aggarwal, cofounder and CEO of Ola.