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 Press Coverage |
Lafferty Publications Limited, Cards International, October 1998:
SBI cards launched
The long-awaited entry of State Bank of India, with more than 8,000 branches across the country, into the cards market could change the industry vastly. Subhash Chopra reports
STATE BANK OF INDIA (SBI) chairman Maya Shanker Verma said he expects to corner 30 percent of the national credit cards market by issuing three million cards by the end of 2001.
The SBI card is a 60:40 joint venture between the Indian bank and GE Capital of the US and is issued under the Visa brand. Like most cards in India, SBI Cards International October 28, 1998
cards will be valid in India and Nepal only, due to exchange control regulations.
GE Capital executive vice-president Nigel Andrews said that the company would bring to the joint venture experience of handling billing and back-office operations for more than 80 million cards worldwide and help create a new climate for the credit cards industry in India.
Visa country manager (south Asia) Chandra Agnihotri added: "In two years' time, SBI will emerge as the leading player to capture a significant share of the national cards market."
Visa has come to another agreement - with Equifax Venture Infotech (EVI) which is a 50:50 Indo-US venture - to boost its business via a network of electronic points-of-sale (POS) devices at accepting merchant locations. There are only about 2,500 POS terminals in the country but EVI plans to set up 10,000 terminals by the end of 1999.
MasterCard is also engaged in a parallel exercise in conjunction with Citibank by setting up 1,000 terminals at merchant locations in Bangalore, India's equivalent of Silicon Valley, and enabling customers to use its Maestro network. More POS terminals are planned for other cities in the country. Cards International October 28, 1998
The current number of credit cardholders is estimated at slightly less than three million, out of a total population of 980 million. India's burgeoning middle class, roughly estimated at 250 million to 300 million, is being vigourously targeted by bankers and credit cards issuers. In reality, however, banking activity is concentrated in about 200 larger cities and 3,000 towns.
Nevertheless, given the stability of the Indian economy and rupee currency vis-a-vis its southeast Asian counterparts, industry promoters are looking to further develop the market. Citibank, the long established player, is estimated to have one million cardholders as its customers in India. HSBC, Standard Chartered and Indian public sector banks such as Bank of Baroda (BOB) and Central Bank are the other leading cards players.
The slow development of the Indian credit cards industry reflects the low spending power of the salaried classes, the biggest section of the cardholding community. A survey of Indian cardholders' spending power by the New Delhi-based Credit Card and Management Consultancy firm reveals that the average spend of those with a monthly income of Rs10,000 ($236) is only Rs2,600. Those with a monthly income of Rs10,000-Rs15,000 only spend Rs4,300, while those with a monthly income of more than Rs15,000 have an average spend of about Rs4,800.
Cards International October 28, 1998
The main reason for the slow development of the credit cards industry is that cash is still the king in India for all classes of spenders and merchants accepting credit cards suffer from an image of overcharging. Some industry observers, however, are optimistic that the number of cardholders will double to six million by the turn of the century. Given the fact that the industry has taken nearly 18 years to reach three million cardholders, the six million target looks rather ambitious. But even that would leave India far behind China, a comparable country with a 1.2 billion population and 21 million Visa cards alone - 13 million debit and eight million credit.
Certainly, there is scope for expansion in India and issuers are highly competitive in their efforts to win new customers and retain old ones. Co-branding and affinity are among the main strategies being adopted. Citibank has joined with Phillips to offer co-branded Visa cards. Standard Chartered Bank and variety goods and gadgets' direct sales group Amway offer co-branded cards, while BOB offers BobCard petrol cards with Bharat, the petroleum gas outlets.
Affinity cards with top public schools in India such as Mayo College and Doon School have also been among BOB's recent launches. MasterCard has gone into co-branding with Citibank and Times of India newspaper group by launching Times cards in March 1998. Earlier this year, MasterCard and Citibank launched affinity cards with the Indian army and air force to commemorate the country's Cards International October 28, 1998
50th year of independence. Standard Chartered has also teamed up with motor manufacturer Mahindra & Mahindra, as well as allying itself with Amway.
Cards issuers and associations have also begun to use sports stars to advertise their products. Visa, for example, has paid an undisclosed fee to use the image of Sachin Tendulkar, the living cricket legend, while MasterCard is using Kapil Dev, the other Indian master of the game.T