Globalization of the Indian
economy has led to the
emergence of foreign banks and new generation
private sector banks which have inducted technology extensively to
establish competitive advantage. Further, these banks have
introduced a number of customer-centric and technology-enabled products
and services to augment their income. Credit card segment is one
such avenue, which is gaining popularity and is growing at an
impressive annual rate of about 30% in our country.
The credit card market in
India has about three million customers with a value turnover
of around Rs. 2,500 cr. The market is expected to grow by 30%
per annum. However this would still be a very low penetration in a
potential market of 60 million cardholders. Further, according
to the latest data from the Visa International, an average
Indian cardholder uses his card 9.3 times, spending around Rs. 14,700
per year. Most of them do not use their cards and almost
20 to 30% cards remain inactive (less than one usage every quarter). The credit
card market has almost unlimited opportunities and at present,
the number of banks issuing cards is also on the rise. The credit
card business is a low-margin, high volume business.
Thus, given the low income per card and the high
initial investments required by the bank, large volumes in terms
of cards issued and the transactions financed are required to make
the operations profitable. In spite of the low margins, banks
are showing interest in this line of business. Since the Indian
consumer is no longer averse to purchasing on credit and
considering the potential for card business in a market of 16
million customers, Syndicate Bank took the initiative of introducing
`Syndicate Bank Global Credit Card' in association with VISA
International in the year 2003.
The main advantage of this segment is that the
customers spend sizeable amounts of their money at departmental
stores, petrol pumps, hotels, restaurants, electronic and
electrical appliances, and other utility outlets. If the banks can
mobilize significant portion of these transactions through the
payment products, then the banks can generate substantial
non-interest income, besides fee income by way of entrance
fee/annual fee and finance charges on the revolving credit. |
