Credit Cards Spends

As per RBI bulletin, number of outstanding credit cards in India at December-11 was at 1.77 crores down from 1.8 crores at March-11. However, number of transactions and value of credit card transactions are showing a steady increase despite stagnation in number of credit cards.

Firstly, let’s have a look at count of credit card transactions. Number of credit card transactions for the first 3 quarters of FY 2011-12 was 234.8 million; a rise of 19.8% compared with that of the first 3 quarters of FY 2010-11.

Also the number of credit cards transactions is showing an average increase of 19.8% compared with same month of the previous year.

Credit card transactions for the first 3 quarters of FY 2011-12 were Rs. 707.11 billion; a rise of 27.6% compared with that of the first 3 quarters of FY 2010-11.

Credit card transactions touched Rs. 755.16 billion in value terms in FY 2010-11. Spends of the first 3 quarters of FY 11-12 has already crossed 94% of last financial year spends. Considering we can expect the current FY spends to be Rs. 963.85 billion on conservative basis and it will not be a surprise if it touches the magic figure of Rs. 1,000 billion.

Credit card transaction value	FY 2010-11 (Rs. billion)	FY 2011-12 (Rs. billion)
Till December (in first 3 quarters)	554.01	707.11
During the year	755.16	963.85 (projected)

Credit cards transaction in value term is showing an average increase of 27.9% compared with same month of the previous year.

However, average value of transaction per card is hovering in the range of around Rs. 2,700 to Rs. 3,100.

Note: Please note as per one of the reputed business newspaper websites, credit card transaction value in Dec-11 was up 53%. However, the correct percentage is 23%. Link of the site is:
http://articles.economictimes.indiatimes.com/2012-02-13/news/31055228_1_debit-card-card-transactions-credit-card
Refer the comment section also.

Source: RBI Bulletin (http://rbi.org.in/home.aspx)

Visa and Monitise Set to Transform Mobile Payments Services in India

Movida, a mobile payments joint venture backed by Visa and Monitise , has signed an agreement with HDFC Bank, India's second-largest private bank, to introduce a first of its kind mobile payment service. The new service allows HDFC Bank customers to pay bills, top up prepaid airtime and buy tickets from their mobile phone and is designed to operate across all mobile networks using any Visa and non-Visa branded payment account. It can be used by any mobile subscriber, anywhere and accessed by even the most basic mobile phone.

Naushad Contractor, Movida's President and head of the Monitise and Visa joint venture in India, commented: "This is a service designed for Indians. As we rollout the service to other banks more Indians will be able to benefit from mobile payments. Wave goodbye to waiting in long queues or visiting post offices or payment machines to pay bills as you will now be able to do that right from your mobile phone. This service is going to drastically reduce the time & energy Indians waste every day waiting to pay bills."

The new service uses menu-based USSD mobile technology making it one of the easiest services to use and the most widely available. After linking their HDFC Bank Visa or non-Visa payment card to their mobile phone number, cardholders can access the service via USSD over Movida's secure connection. From then on it is just a matter of selecting the payment service require and making the payment. The simple menu can complete a transaction in only a few steps.

And not only is the service simple, it's secure and backed by two of the world's most trusted brands in electronic and mobile payments. The system encompasses various security measures to maintain account integrity, including a unique PIN number set up on the phone to access the account information. Only the user's bank-registered phone can be connected to the service.

Contractor added: "This technology will be a game changer the way the iPhone was for mobile phones. This is a smart service for smart people and epitomizes everything Visa and Monitise stand for: it is fast, reliable, secure, and simple - and it will change the way consumers in India pay, forever."

Rahul Bhagat, Head-Retail Liabilities, Marketing & Direct Banking Channels, HDFC Bank, said: "HDFC Bank has always been at the forefront of technology to ensure that our customers have greater choice and convenience at their disposal. The partnership with Movida is a crucial step whereby we will enable our customers to carry out multiple mobile commerce transactions from the most basic handsets."

This service reaffirms HDFC Bank's commitment to bring the latest service and convenience to our customers. All our customers throughout the country can now pay their bills and top up talk time with a few clicks of their mobile phones. This will save them considerable time and help them focus on more important things in life."

As India continues the upgrade of its Internet and telecoms infrastructure to rural areas, the new mobile service finally allows millions of Indians currently excluded from enjoying the benefits of mobile and online payment services to become part of the digital age via their basic prepaid mobile phone.

The service is initially being offered to a select number of valued customers before being rolled out across the country later in the year.

USSD: Unstructured Supplementary Service Data

USSD is a protocol used by GSM cellular telephones to communicate with the service provider's computers. USSD can be used for prepaid callback service, mobile-money services, location-based content services, menu-based information services. USSD messages are up to 182 alphanumeric characters in length. Unlike Short Message Service (SMS) messages, USSD messages create a real-time connection that remains open and allows for a two way exchange of a sequence of data. This makes USSD more responsive than services that use SMS.

About Movida India Pvt. Ltd:

Movida India Pvt. Ltd. is a 50:50 Joint Venture between Visa /quotes/zigman/502306/quotes/nls/v V +0.13% and Monitise that establishes mobile handsets as the core device for making electronic payments, Movida works primarily with financial institutions and mobile service operators to provide services to consumers across India and epitomizes the fundamental technologies of Visa and Monitise to deliver a fast, reliable, secure, and simple service using existing technologies and networks. Movida aims to revolutionise mobile based payment options by providing cost effective and secure solutions that are easy to implement for Movida's clients, and are easy to use and secure for consumers. For details please visit www.movida.in

About Visa Inc.:

Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world's most advanced processing networks--VisaNet--that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank, and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: Pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com .

About Monitise

Monitise plc is a technology and services company delivering mobile banking, payments and commerce networks worldwide with the proven technology and expertise to enable financial institutions and other service providers to offer a wide range of services to their customers in developed and emerging markets.

With live services in the UK, the US, India and Africa, the company is working with international partners to extend trusted and secure mobile banking, payment and commerce services in territories worldwide, including Europe, Asia Pacific and Latin America. Monitise has strategic partnerships with Visa Inc., Visa Europe, RBS Group and FIS. Other leading partners and clients include HSBC, Lloyds Banking Group, First Direct, U.S. Bank, Standard Chartered Bank, Travelex, Vocalink, Vodafone, Orange, O2, T-Mobile, 3 UK, Research In Motion, Best Buy Europe, The Carphone Warehouse, First Eastern, Astra, JETCO and PCCW mobile. More information is available at www.monitisegroup.com

http://www.marketwatch.com/story/visa-and-monitise-set-to-transform-mobile-payments-services-in-india-2012-02-22

Citibank India renews focus on credit cards

Citibank India is once again growing its unsecured business (credit cards and personal loans), that had taken a hit following the financial crisis of 2008. Unsecured loans constitute 50 per cent of the retail book, while the remaining 50 per cent comes from mortgage loans, advance against shares and deposits.

"The new client acquisition for credit cards has grown by 50 per cent compared with last year. Going forward, we expect a growth of 20-25 per cent in credit cards. We have 2.2 million cards inforce as of December 2011," said Anand Selva, country business manager, global consumer group Citibank India.

The bank is also working on increasing its market share among the emerging affluent class to 15 per cent in the next two to three years from the existing 10 per cent. In line with its new strategy, the bank on Monday launched Citibanking, a new range of products, services and benefits for customers who maintain a relationship value of minimum Rs 2,00,000 with the bank.

Mckinsey India estimates the emerging affluent segment in India constitutes of 16 million households, with 37 per cent in the top 14 cities. This segment consists of salaried professionals and also includes 35-40 per cent of self employed individuals with an annual income ranging from Rs 3,00,000 to Rs 1,500,000. The segment is expected to grow at a CAGR of 9 per cent, while the existing Rs 25,000 crore revenue pool is expected to grow at a CAGR of 16 per cent.

"The emerging affluent segment is a top priority for Citibank in Asia. The segment is large and growing quickly as a result of urbanisation, globalisation and economic expansion. Today, we are excited that India is launching a new value proposition for the emerging affluent class," said Daniel Baranowski, head of emerging affluent segment for Citi in Asia Pacific.

For customers who maintain a relationship value of a minimum Rs 2,00,000 with the bank, there would not be any cash withdrawal charges at any ATM anywhere in the world, in addition to zero fees on a host of banking services such as draft issuance, delivery, duplicate statement, funds transfer and stop payment. The bank will provide a dedicated personal banker as the single-point-of-contact for financial planning, emergency cash services of up to $1,000 through Citibank's overseas branches.

The bank has also launched a debit card that offers evergreen reward points that can be redeemed for air-miles or cashback. Its customers can avail of a Citibank Rewards credit card with 1,500 bonus reward points, complimentary access to select airport lounges and dedicated concierge services via debit card.

Citigroup hopes to flood China with credit cards

Citigroup (C) is set to become the first global bank to issue its own credit cards in China. The financial giant said Monday that Chinese banking regulators have given the company the green light to begin issuing credit cards in the country.

Although credit cards are fairly new to China (local banks introduced them to the mainland only in the mid-1980s), the market is growing fast. Some 268 million credit cards are in use in China (compared with more than 1 billion in the U.S.), roughly five times as many as were in circulation on the mainland as of 2006. Amid persistent economic weakness in the industrialized world, large Western financial institutions are eager to tap the country's enormous market. 

For Citi, consumer lending in Asia-Pacific is already big business, generating profits last year of $1.9 billion on $8 billion in revenue. The company disclosed last year that expansion in the region has been the largest contributor to the bank's earnings. To this end, Citi CEO Vikram Pandit has made the push into China and other emerging markets, such as Brazil and India, a pillar of the company's growth strategy. As much as three-quarters of incremental consumer spending will come from these economies by 2020, according to some industry estimates. By that measure, Asia would surpass North America as the world's biggest consumer market in less than a decade.  

Until 2008, foreign banks were required to partner with Chinese banks to issue credit cards. The only bank outside the mainland to offer its own credit cards in China to date is Hong Kong's Bank of East Asia. Such restrictions have left the card market largely under the control of a single local payments processing company, UnionPay. 

But non-Chinese financial firms have been pushing the People's Republic for years to open the industry to foreign players. Now, Citi is expected to introduce a bank-branded credit card in China by year-end, which is certain to spur other big financial institutions to try to follow suit. One key in how China's credit-card sector will develop in the coming years -- whether Chinese authorities will end UnionPay's monopoly on card processing by permitting MasterCard (MA) and Visa (V) to launch rival networks. 

Why Chinese savers could thwart Citi

Several factors are driving the growing use of credit cards in China. The country has a burgeoning middle class, especially in the large coastal cities that dominate trade on the mainland. Younger, tech-savvy consumers are also increasingly comfortable using credit, especially with the emergence of online shopping. 

Still, as of last year only some 6 percent of all commercial transactions in China were conducted using a credit card. That reflects the significant obstacles that could slow the adoption of credit cards in China and impede Western banks. For one, China's payments infrastructure outside its biggest cities remains rudimentary. 

More important is the traditional focus in China on saving money. Chinese households save about one-fourth of their discretionary income, six times the average savings rate in the U.S. A corollary to such concerns is the widespread cultural aversion to debt. Debit cards are a far more popular form of payment in China, with more than 2 billion of the cards believed to be in use (for a population of 1.3 billion). As one marketing expert who has studied Chinese consumer attitudes told Shanghai Daily last year:

"There is a great reluctance to go into debt and to then pay interest on that debt, which of course is a defining feature of credit card products," says [the] study's co-author Steve Worthington of China and Australia's Monash University.

Help for the U.S. trade deficit?

Yet such social attitudes are changing, easing Chinese consumers' reluctance to buy on credit. In 2010, credit card-based transactions in China amounted to $1.6 trillion, the Financial Times notes. During last month's week-long Chinese Lunar New Year holiday, mainland consumers racked up $15.9 billion in credit-card charges, up more than 30 percent compared with the same period last year, according to UnionPay.

Growing credit-card use in China could have repercussions for the broader global economy. It could foster a pick up in domestic consumption, long a goal of Western governments eager to boost exports to China. That, in turn, could stimulate growth in the U.S. and in Europe. 

It also could help shrink America's enormous trade deficit with the People's Republic, a persistent source of tension in U.S-China relations. Since

2001, that gap has cost the U.S. 2.8 million jobs, according to the Economic Policy Institute, a Washington think-tank. Alluding to his concerns about the deficit, President Obama said in his State of the Union speech in January that the U.S. will form a trade enforcement group to investigate "unfair trade practices in countries like China."

IDBI Bank launches debit cum credit card

IDBI Bank today unveiled Magic Card -- a debit card with in-built credit for salary account holders in a bid to improve its CASA ratio to 24 per cent from 20 per cent as of now during the year.

"The card will work as a debit card till the account holder has balance in it but once exhausted, any further withdrawal or expenditure on the card, magic card will act similar to a credit card," IDBI Bank Chairman and Managing Director R M Malla said.

Though, only basic difference between the magic card and a typical credit card is there is no free credit period but at the same time rate of interest will be much lower and linked to bank rate.

The credit limit or overdraft limit will be either two or three times of net salary depending on the rating of the organisation.

However, the facility will be offered only to salary account holders in the bank.

RBI’s First Quarter Review of Monetary Policy

• The Repo and Reverse Repo Rate rose by 50bps to 8% and 7% respectively
• Cash Reserve Ratio has been maintained unchanged at 6%
• Wholesale Price Inflation (WPI) estimate for March 2012 was raised to 7% from 6% with an upward bias
• Bank deposits are projected to grow at 17% and non-food credit is projected to reduce from 19% to 18%
• Projection for GDP growth is maintained at 8%

HDFC Bank to offer more credit cards to non-account holders

In a shift from its traditional practice of offering credit cards to its captive clients, HDFC Bank, India’s second-largest private sector lender, is now offering more cards to people outside its existing client base.

Currently, customers outside the bank’s existing client base account for 25 per cent of its card base, compared with 10 per cent a year ago.

According to Pralay Mondal, country head (retail assets and credit cards), the move is in line with the bank’s strategy to enter the high-end cards segment. “As we go to super-premium clients, we would look more for external customers. We have already made a shift. While the ratio earlier stood at 90:10, about 25 per cent of our business (in credit cards) now comes from our external clients,” Mondal said during an interaction with Business Standard. With a book value of close to Rs 6,000 crore, HDFC Bank accounts for nearly 30 per cent in the credit card business in India, with the number of cards at 5.5-6 million. “We are issuing close to 85,000 to 90,000 cards a month, and with some new launches, we expect the monthly issuance to cross 100,000 cards soon,” Mondal said.

Speaking about the Infinia high-end credit cards, which the bank launched last month, Mondal said the response has, so far, been good and the bank now plans to introduce a few cards a couple of notches below Infinia to cater to the demand. “We have a cap of 5,000 cards for Infinia, but the demand is for a lot more. That is why we want to come out with variants just below Infinia quickly,” he said.

The lender has seen robust demand for its retail products and has been disbursing Rs 5,000 crore every month, which, it says is the highest in the industry. “We have disbursed loans worth Rs 15,000 crore over the last three months. Each and every product in our retail segment is profit-making. If the total advances in the banking sector grows 17 per cent, retails loans for the industry would grow by around 15 per cent in the current financial year. For HDFC Bank, the growth (in retail loans) would be significantly higher than that,” he said. The bank’s retail book has grown around 30 per cent in 2010-11 and growth in cities, barring that in the top nine ones, contributes nearly half to the bank’s retail assets. Nearly 70 per cent of the bank’s retail loans comprise auto, personal, home, commercial vehicles and two wheeler loans. The bank is slowly beefing up its presence in segments like gold loans, loans against shares and education loans.

Despite seeing aggressive growth in the rising interest rate scenario, the bank is confident of maintaining the rate of growth in retail loans—which is about 50 per cent of its total loan book. The bank also dismissed worries that high rates would translate into a rise in delinquencies in its retail loan portfolio, especially in the unsecured segment.

http://www.business-standard.com/india/news/hdfc-bank-to-offer-more-credit-cards-to-non-account-holders/444573/