 "Co-branded credit card share likely to double by FY28: Visa's Rishi Chhabra")
Visa, one of the leading payment networks, sees significant growth of co-branded cards in India over the next four years due to higher customer engagement of such cards compared to traditional credit cards.
Co-branded credit cards are specialised cards that are issued through a three-way partnership — the issuer (bank), network, and merchant.
The share of co-branded credit cards, which accounted for 12-15 per cent of total credit cards in the previous financial year (FY24), is expected to grow significantly, potentially crossing 20-25 per cent by FY28, driven by increasing consumer demand and the rise of e-commerce, said Rishi Chhabra, country manager-India at Visa.
“This growth trajectory is twice as fast as that of traditional credit cards. Co-branded cards have a strong impact on customer engagement, with activation rates reaching an impressive 70 per cent, significantly higher than the 50 per cent seen with traditional credit cards”, Chhabra told Business Standard during an interaction.
Additionally, he said, transactions on co-branded cards are 30 per cent higher than traditional credit cards while spending per co-branded card is 20 per cent higher.
Currently, there are around 70 different co-branded credit cards available in India across all merchant categories. Of this, Visa has more than 30 co-branded programmes in India, Chhabra said. Globally, Visa has 700 co-brand programmes.
Currently in India, among merchants, e-commerce players are dominating the co-branded credit card space, with offerings such as Flipkart-Axis Bank card, and Amazon-ICICI Bank card.
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“We are a few years behind the global best practices as far as co-branded cards are concerned. E-commerce co-branded cards have played out really well in India because the benefit is very well understood and the user journey has been fantastic, both in getting the card and then utilising it as the benefit is well articulated,” Chhabra said.
Other segments, including airlines, hotels, travel, entertainment, and fuel, have yet to show the same level of growth as the e-commerce sector in the co-branded credit card space. However, going forward, much like global trends, hotels and airlines are expected to emerge as key growth areas for co-branded cards.
Additionally, Chhabra said, over the last five years, the proportion of co-branded cards has increased from one in ten to one in three new credit cards. Co-branded credit cards currently account for around 33 per cent of new issuances and are expected to further grow as the market evolves, he said.
According to the latest Reserve Bank of India (RBI) data, there are 106.88 million credit cards in the country. HDFC Bank is the largest issuer, followed by ICICI Bank, SBI Cards, and Axis Bank. Currently, in India, there are three major card networks – Visa, Mastercard, and RuPay – that hold the lion’s share of the market.
“We obviously have a good share of the market as it relates to credit cards. We have been a leader in this space for the longest time,” Chhabra said, adding that globally, large hotel chains, airline chains, and retail chains chose Visa as their dominant co-brand partner and the company is trying to replicate the same model in India.
Regarding the impact of the slowdown in credit card issuances due to stress in the segment experienced by major issuers, and its effect on co-branded credit card issuance, Chhabra said: "All of these P&L (profit and loss) activities — issuances, pauses, default rates, and revolving balances — go through cycles. If there is customer demand and the right products are created for end-consumers, demand will remain, and supply must match that demand."
“Our job at Visa is to make sure that we create relevant products and value propositions. Depending on the cycle, issuer, and the merchant, things will go up and down, but fundamentally, co-branded credit cards are here to stay. If issuance of cards goes down, co-brand issuance will also go down and vice-versa”, he said.