Origin of Credit Cards In India:
The usage of Credit
Cards in India is less when compared to the usage of credit cards in China,
Taiwan and Malaysia. It picked up only in the last 10 years until then the
Indian looked it as a luxury. The idea of owning a credit card has had its
roots in the minds of millions of Indians. They started viewing the card as a
convenient substitute to carrying cash. The change in mindset is clear from the
growth, both in terms of absolute numbers and growth rates. The industry has
grown at the rate of 30% and strongly counts for steady years to come.
Credit Cards in India:
According to Visa
International an average Indian cardholder uses his card 9.3 times, spending
about Rs.23, 000 per year. A number of card owners do not use their cards and
almost 20-23% cards are inactive. In India, two players dominate the credit
cards industry. Visa and Master Cards and 15 out of 17 banks provide credit
card services through Visa or Master Cards.
The importance of
having a pie in the credit cards segment was not lost on any bank, and most
banks started their credit card operations. Currently, there are more than 20
banks offering credit cards, but the market share of the top five exceeds 75%.
Credit card is a low margin, high volume business. The initial investments
required by a bank are very high. The income per card is low, thereby requiring
large volumes in terms of cards issued and the transactions finance to make the
operations profitable. Another reason for the inability of players to upstage
the well-entrenched ones is lower patronage by the merchant and business
outfits.
The bigger businesses
and merchants are already acquired by the existing players, so far new banks,
braking into this business and convincing a merchant is increasing because the
banks are shifting towards lower end merchants. Secondly, because of
competition in acquiring business, new categories of merchants are coming up.
The foreign banks have a dominant share due to various reasons like having been
in the field for decades, sound operational and financial strength, strong
brand recognition etc. They were catering to the upper segments and charged
high annual fees. Later, with aggressive entry of SBI, ICICI Bank and HDFC
Bank, the rules of the game changed. The cards were positioned in manners which
gave an impression that the cards can be acquired by people from not only the
upper class, but also the middle income categories. This was the strategy
followed by SBI-GE as a result of which it is the third largest issuer of
credit cards today. It positioned itself in a segment as to be of mass appeal
and at the same time reinforced a clean and dependable image of the bank.
The new private banks
like ICICI and HDFC are also aggressively increasing their share. They adopted
a strategy of reaching lower down the income strata by lowering down their
eligibility norms. Of course, the credit limits are set at lower levels as
compared to the foreign banks. As a result of this strategy, the credit cards
base is widening day by day with the increase of base in B-grade cities.
Related Topics
Privacy Policy, Terms and Conditions, DMCA Policy and Compliant
Copyright © 2018-2024 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.