Axis Bank Renewed Push on Payments / Credit Cards Business

Axis Bank has been undergoing a structural shift for sometime. It got a shot in the arm with HDFC Group veteran Amitabh Choudhary joining as the CEO of the Bank. Within retail, there has been a gradual increase in the share of high yielding retail products like credit cards and personal loans.

Payments business plays four important roles in a bank’s strategy (1) acts as the face of the franchise, (2) increases customer engagement, (3) drives profitability and (4) drives partnerships. Retail electronic payments in India are growing at a tremendous pace which has had a positive impact on the cards business.

~100% of new credit card customers are existing customers of the bank. These customers have lower risk levels compared to other customers. The percentage of credit card penetration of Axis Bank has increased from ~15% in FY2016 to 20% in FY2019. Card fees as percentage of overall fee income has increased to ~25% in 9MFY19 from 10-15% few years back. With gradual increase in card business, the share of retail card fees to overall income will see robust momentum going ahead.

More than 50% of credit card customers have the mobile application. Higher interaction with the mobile banking application of the bank increases customer engagement substantially (~30% higher activity and ~130% higher spends/month).

Axis Bank Relying Heavily on Analytics for Decision Making
The agenda of the business analytics unit (BIU) is to monetize the various resources and datasets available to the bank so as to increase overall business while managing risks in a prudent manner. Significant portion of the retail lending business is generated across this channel. ~35% of Savings Account customers of the bank have at-least one pre-approved lending offer available to them (up from ~25% in April 2017 and ~30% in April 2018). Most of the credit cards are pre-approved products for select existing customers of the bank

Scoring Customers on Axis Proprietary Model vs CIBIL / Experian credit Score
Risk scorecard forms the core of risk management strategy in retail for the bank. The company has a scorecard available for most products. Additionally, the company has developed proprietary models for select products so as to improve credit underwriting. Proprietary models are functions of bureau variables, application information, internal bank variables, etc. These proprietary models provide significant competitive advantage over a vanilla bureau score.

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