In our previous article we presented that Credit Cards is the Next Big Product for Banks contributing to Banks Bottom-line in the Wealth Management Segment. Today we’d like to analyze on the basis of Data which Banks are Leading the Credit Cards Business Segment in India.
HDFC Bank, SBI and ICICI Bank seem set to lead this business. The share from this business is likely to be most significant to HDFC Bank (over 15% of fee income) given its high market share in credit card transactions or volumes. For most other banks, the share of this business is relatively lower at less than 10% of the fee income. Internationally, banks earn 10-15% of their fee income through cards.
Credit card income for Banks is from (1) net interest income (2) interchange fees (Merchant Discount Rate) which includes foreign-exchange income (3) processing charges (conversion of loans to personal loans, EMIs) and (4) other charges (annual payment, late payment). Banks are likely to benefit as it is a payment platform (compared to a check or the ECS/NEFT/RTGS system) that pays the bank for clearing a transaction.
The strong retail customer base and focus to develop alternative revenue streams, independent of balance sheet growth, offers strong incentive for private banks to grow this business.
The following Chart Shows Penetration of savings, credit and debit cards, March fiscal year-ends, 2006-11 in India With just 3.0% of Indians having access to Credit Cards, expect atleast 20% CAGR from this segment until it reaches 10% of the overall Savings Account.