Snapdeal and HDFC Bank tie up to launch co branded credit card

Snapdeal and HDFC Bank tie up to launch co branded credit card.

E-commerce fuels jump in credit card transactions

Outstanding credit card loans stood at Rs 30,300 crore as on 31 December 2014, up 24% from Rs 24,400 crore a year ago.

Credit card transactions have surged in the past year as more Indians flock to e-commerce websites to buy everything from clothing and groceries to consumer electronics, drawn by the variety of products and hefty discounts on offer and the ease of shopping online. 

SBI Cards and Payment Services Pvt. Ltd, for example, has seen a 60% year-on-year jump in credit card spending on e-commerce transactions in the year to December. SBI Cards is a joint venture between State Bank of India (SBI), the country’s largest bank, and General Electric Co. The contribution of e-commerce transactions to total spending on credit cards issued by SBI Cards increased to 40% as on 31 December from 26% a year ago, said Vijay Jasuja, chief executive officer (CEO) at SBI Cards. “The market itself is growing thanks to the ease of shopping on e-commerce websites. The credit card industry is seeing about 26-27% growth in spends. People are finding it more practical to shop online given the range of products available. Consumer durables, jewellery and travel are the major spend areas,” Jasuja said. 

The impact of the rise in e-commerce transactions is visible on industry-wide data available on the Reserve Bank of India (RBI) website. Outstanding credit card loans stood at Rs.30,300 crore as on 31 December 2014, up 24% from Rs.24,400 crore a year ago. Between December 2013 and December 2012, outstanding credit card loans had remained flat. 

Credit card spending is growing faster because most people who use e-commerce websites prefer to pay with cards because of the offers and discounts they receive on these transactions, said Jairam Sridharan, president and head of retail lending and payments at Axis Bank Ltd. “E-commerce is increasing in a very big way and is likely to form a key part in banking card strategies going forward. We expect the number of e-commerce transactions to increase five times to five crore (50 million) at the end of this fiscal from around one crore in March 2012. In terms of value, it will increase four times to about Rs.5,000 crore (at the end of this fiscal) from Rs.1,250 crore in 2012,” Sridharan said. A recent study by the Boston Consulting Group (BCG) estimates that e-commerce spending would grow to $60-70 billion in the next three-four years, from $16-17 billion now. 

HDFC Bank Ltd is the leader both in terms of the number if credit cards with 5.57 million cards on issue and monthly credit card spends of Rs.5,229 crore as of October 2014, according to the latest data available on the RBI website. Both e-commerce transactions and their contribution to total consumer spending have increased in the last one year, said Parag Rao, head of payment products, merchant acquiring services and marketing at HDFC Bank. “The contribution of e-commerce spending through our credit cards has increased to 40% of total spends so far this financial year, up from 27% last financial year, and this may grow more faster in the near future as more and more people are convinced about the safety of transacting on the Internet,” he said. To cement its position as the leader in the credit card segment, HDFC Bank plans to launch an e-wallet in March, through which consumers can load their credit and debit card details on their phones and [ay with one click, managing director Aditya Puri said on Thursday. 

Citibank NA is No. 2 in terms of credit card spending with monthly credit card spends of Rs.2,798 crore as of October. Mukul Sukhani, head of small business payments solutions at Citibank India, said growth in card spending over the last two years has been primarily driven by e-commerce transactions. “In 2012, online spends contributed 22% of total spends, which increased to 31% in 2014. During this period, overall spends on Citi cards grew by 31%. More importantly, 60% of this growth was contributed by e-commerce spends, with e-tailers being the new growth engine,” Sukhani said in a email response to queries from Mint. Bankers said there is no reason to expect this growth to slow in the medium term. While India’s economy remains dominated by cash, there is a slow shift towards plastic money. For banks, this shift has meant the costs of deploying and distributing cash has come down and it has opened another small avenue for revenue in terms of interchange fees, said Sridharan of Axis Bank. “Card-based transactions are still small compared to cash, but it has helped move transactions away from cash into digital. I would still think that these transactions will increase 40-50% year-on-year in the foreseeable future,” said Sridharan. 

RBI estimates that the amount cash floating in the system is about 18% of the country’s gross domestic product, making India one of the most currency-dependent countries in the world. Jasuja of SBI Cards said there is enough space for all banks to grow in digital payments as the shift away from cash gains momentum. “The market is growing. With more and more people opting for cashless transactions, there is place for everyone to grow,” he said

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