 "Bajaj Fin exits co-branded credit card biz, ends tieup with DBS India, RBL")
Bajaj Finance has decided to exit the co-branded credit card space as it has ended its eight-year tie-up with RBL Bank and DBS Bank India, which started a couple of years back.
The move comes on the back of a Reserve Bank of India direction that restricted the co-brand partners’ role to only sourcing cards, and providing access to the cardholder for the goods/services offered. Collection of dues, an activity, which Bajaj Finance has built capabilities over the years, was not allowed by a co-brand partner.
RBL Bank’s outstanding credit cards stand at 5.17 million as of October, of which 3.4 million are in association with Bajaj Finance. RBL Bank partnered with Bajaj Finance in 2016 to issue co-branded credit cards for five years. The partnership was renewed for another five years in 2021.
DBS Bank India launched its credit card with a tie-up with Bajaj Finance in June 2022. The former has a credit card base of 500,000, most of which are co-branded.
Following the circular issued in April 2022, the entire collections part was moved back to the banks.
“Bajaj Finance has a large customer base and has a strong collection expertise across 4,200 locations in the country. The co-brand card business for Bajaj was a strategic one. It was not just a sales and distribution agent,” said a source aware of the development.
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“In credit card business, if a bank doesn't have a strong expertise in infrastructure and collection, it will be difficult to sustain. Without collection, Bajaj decided to rethink their strategy if they can create a big business with partners without such capabilities,” the source said.
While Bajaj Finance did not earn any fee for the collection, the cost of collection was borne by the banks.
RBL Bank had said that for the past one and a half years, the bank has been working to reduce its reliance on a large co-branded partner in the credit card segment. Previously, over 60-70 per cent of card acquisitions were coming through Bajaj Finance. However, by Q2FY25, this had been reduced to 36 per cent, with the remainder of acquisitions coming organically.
In July – September quarter, RBL Bank faced higher slippages from the credit card segment, owing to the impact of changeover of collection services. In July, the bank decided to move the collection process in house. RBL Bank reported a 24 per cent decline in net profit as overall provisions shot up due to elevated stress in the credit card and microfinance portfolios.
"As a strategy, we want to have a diversified origination channel. When we were scaling up, we were acquiring about 200,000 to 250,000 cards per month, but we’ve reduced this to 100,000 due to our priorities of doing more with customers than just a card,” said Jaideep Iyer, Head - Strategy, RBL Bank.
“This, coupled with a challenging environment surrounding unsecured retail, meant incremental sourcing was reduced. With a base of over 5 million cards, the strategic need for this partnership has diminished. Therefore, this is a logical outcome for both parties,” Iyer said.
Even if Bajaj Finance has terminated the relationship with banks, it will continue to earn a fee from card spends and from annual fees of customers as these customers were sourced by the non-banking finance company.
Cashing out
Main pointer: Move comes on the back of a RBI direction that restricted the co-brand partners’ role to only sourcing cards, and providing access to the cardholder for the goods/services offered
RBL Bank’s outstanding credit cards stand at 5.17 million as of October
DBS Bank India has a credit card base of 500,000
Even if Bajaj Finance has terminated the relationship with banks, it will continue to earn a fee from card spends and from annual fees of customers