India Credit Cards Review, Advise & Market Research
The Government of India’s push for digital transactions which started from 2016 using JAM trinity (JanDhan, Aadhar and Mobile) is helping in changing the consumer preference structurally. This structural shift in the consumer preference will also help the credit card industry going forward.
Credit Card outstanding in India is just ~6% of debit card spends and this has not improved meaningfully in recent times. If we look at the composition of digital transaction over
SBI Cards has the highest number of co-brand partnerships (18) and these cards comprise one third of its card additions. Co-branded cards are issued in conjunction with consumer-facing partners with strong and loyal customer bases. Marquee co-brand partners include the likes of Air India, IRCTC, Apollo, OLA, Yatra, and BPCL.
The value offerings of these cards are designed to address specific needs of customers and increase stickiness. It also serves to enhance the brand strength of SBI Cards by partnering with strong brands and allows access to a
Read moreWhy SBI Cards has Largest Number of Co-Branded Partners ?
India’s Leading Credit Bureau – CIBIL data reveals that delinquencies across product levels in the retail segment have shown a modest increase but the situation is not alarming. The main segment which is under stress is auto loans, which is driven by CVs as evidenced in the latest results of banks.
Credit Card Segment – While the overall credit card balances grew by ~41% YoY to ~Rs1.1tn,
balances in the semi-urban and rural areas grew at a faster pace (+52% YoY) indicating increasing usage of cards as a payment option in these areas.
In the Personal Loan segment, the origination volumes more than doubled to 7.3m accounts out of which ~68% were
Credit Cards Spend in India is an evolving industry with >50mn base (~32mn unique customer base), >INR1tn loan outstanding (~1.2% of system credit) and 3% spends/GDP. Over the previous decade, while credit card spends posted ~25% CAGR, growth in the card base has lagged and remains low at ~32mn of unique customer base. Rapid proliferation of e-commerce, improving POS infrastructure and demonetisation were key inflection points for the credit card business.
Penetration of Credit Cards by CIBIL Score
CIBIL has 550 mn records (individuals plus businesses), of which the unique credit card customer base is mere 32mn — sub 6% penetration in credit cards. Moreover,
SBI Cards‘ outstanding card base has grown at a CAGR of 28% over FY15-FY2019 (vs industry CAGR of 22%) with market share of ~18% at Sep-19. With low credit card penetration in SBI customers, strong brand name and distribution, SBI Cards has potential to grow its card base at ~23% CAGR over the next 5 years leading to market share of ~22.5% by FY24. In this backdrop, we do a SWOT Analysis on the Business Model of the SBI Cards.
SBI Cards Strengths
The tutelage provided by SBI gives natural advantage to SBI Cards in growing its business. The advantages come in the form of brand, trust, access to vast customer base and distribution strength. For example: In FY19, 55% of the new customers were sourced from SBI’s customer base. With more than 20 years
Over the next decade, the Indian domestic credit card sector offers an annual profit pool of $4bn (10% of banking sector profit), primarily driven by rising penetration (new customers) as the product segment remains highly under-penetrated. To put this in context, TransUnion CIBIL estimates that only 25% of the adult population in India is currently credit-active.
India currently has just 45.2mn credit cards outstanding compared to 931mn debit cards. CIBIL database indicates ~210mn customers having score of 700+ (prime / prime plus customers). Changing consumer behaviour/preference toward consumption/personal loans
Read moreCredit Cards – Under Penetrated, 4 Bn Dollar Profit Center for Next Decade