Cobranded credit cards are expected to account for about 25% of the Indian credit card market in terms of issuances by the end of FY28, growing at a compound annual growth rate of 35-40%, according to a report by fintech startup Hyperface and consultancy firm Redseer.
Currently, cobranded credit cards have a market share of 12-15%, the report has estimated. Data from the Reserve Bank of India (RBI) shows that there are around 1 million outstanding credit cards in the country.
RBI does not disclose the market share for cobranded cards.
Cobranded credit cards are ones where the bank is the issuer of the card and a different brand is the customer acquisition channel. Among the popular cobranded credit cards in the country are Flipkart and Axis Bank, Amazon and ICICI Bank, and Swiggy and HDFC Bank.
“We have seen a higher activation rate and higher spend rate on cobranded credit cards and customer engagement with large brands is getting stronger. Overall these factors are helping in faster rate of growth for these cards vis-a-vis traditional credit cards,” said RV Ramanathan, chief executive officer, Hyperface.
Hyperface runs a tech platform which enables banks and brands to offer digital first credit programmes.
The report said credit cards are emerging as the more popular payment mode for consumption expenses of Indian households. Usage of credit cards as a payment mode has doubled from 5% of total personal consumption spending in FY21 to an estimated 10% by FY24, it said.
Relevant rewards, strategic partnerships and exclusive deals will propel cobranded credit cards to grow at 35-40% CAGR compared with 14-15% growth rate for normal credit cards, according to the report.
“On the credit card line of business they make more money on riskier lending, but excess risk will spoil the book, hence banks will need to draw a fine line between risk and rewards for their credit card business,” Ramanathan said.
The report also found that activation rates of cobranded cards is at 70% compared with 50% for their traditional peers, and in terms of spending average, these cards are at 1.2 times of the traditional cards.
The report also said that 75-80% of the cobranded cards are issued through ecommerce partnerships.
While the overall market around cobranded cards is showing positive signals, the central bank has tightened the regulatory screws around this business.
From tighter data security norms to mandatory disclosure to customers and restricting the role of the cobranding partner to marketing and customer acquisition, the RBI wants to manage this sector within a tight leash.
“The understanding is that the regulator does not want any risk sharing and risk outsourcing in this business. Ecommerce players or travel companies are ideal cobranded partners since they focus on getting new customers, and that will grow further,” Ramanathan said.
