Payments has been at the forefront of technological advancements in the banking industry. The first credit card in India was launched in 1981 by a then leading public sector bank. By 1996, the concept of co-branded cards, where two parties typically an issuing bank and a corporate/merchant join hands to offer a product which encompasses the best of both worlds, was introduced in the country by leading foreign bank in association with a consumer durables brand. The marketing strategy was to bring out the “smart way”of buying consumer durables and earn points for every purchase done using the card.
Study of popular co-brand cards in India reveals travel as the prominent use case amongst various use cases followed by fuel, etail, retail shopping. These segments offer tangible benefits like complimentary tickets, shopping vouchers etc. which leads to instant gratification for the customers.
Traditionally, co-branding was popular in credit cards but with emergence of new use cases like transit, meal etc. issuers are tapping the opportunity with prepaid and debit cards too. With the introduction of Smart City Program by Government of India, Banks are partnering with municipality/metro/bus authority, there is a significant push to issue cobranded prepaid / debit cards which is enabling citizens to just walk through the public transport and use the same card for shopping or making payment at any store.
As per the guidelines, issuers need not take approval from RBI for selection of co-brand partner. However, they need to follow KYC, AML, Combating of Financing of Terrorism (CFT) norms.
Here is a snapshot of major revenue and cost relevant to co-branded partnerships particularly:
With benefits comes challenges of a partnership and co-branded partnership are no different. There have been few co-branded cards which could not attract many takers and on further study of such cards reveals the following challenges that an issuer and its partner face:
For many co-branded partnership it has been observed that customer perception towards the co-branded product does not match with the brand value or image of the bank, leading to lesser adoption and activation of the product.
A successful Co-brand card program demands significant resources and attention. All stakeholders must therefore be comfortable making essential investments in order to get value from a cobranded card else risk turning it into an overall negative experience.
Since most of the cobranded partnerships are long term contracts, there is a reputational risk for either of the parties in case of loss of goodwill with the other partner.
We are likely to see issuers focus on providing unique value proposition & increase customer base for co-branded cards. They will ensure stickiness to their co-branded products by tweaking privileges/ reward program to suit changing customer demand. Few key trends that are likely to emerge in near future are as follows:
Segments such as mass transit, smart cities, healthcare, hospitality and aggregators in space of transportation are likely to be captured by issuers as these segments are growing at a faster pace and are relatively untapped. These new segments will allow issuers to acquire new customers.
Diversifying partner portfolio might be looked by few issuers to see larger acceptance of co-branded cards. Partnering with 2 to 3 partners in the same or related segments could be explored by issuers that will help to attract larger customer base.
With merchants and customers both becoming more technology savvy, it is imperative for issuers and their partners to have a interactive platform for digital acquisition and also look at likelihoodofincentivizingcustomers to signup for the card instantly. This is likely to reduce acquisition cost for the issuer.
Although there are few co-branded cards already launched for small and mid-sized enterprises (SMEs) and their employees by certain issuers there is likely to be more corporate cobranded cards that will focus on managing and reducing business expenses. Issuers are likely to partner with the most suitable partner that could be in the space of mobility, expense management solution.
ICICI Bank announced its partnership with MakeMyTrip, the country’s leading online travel company, to launch a range of cobranded credit cards tailor-made to suit the aspirations of the rapidly expanding segment of travel enthusiasts in the country.
In a first-of-its-kind move in India, Amazonhas partnered with ICICI Bank to provide its Prime customers a credit card that leverages shopping expenses into reward points.
When opting for a travel card, the choice is between co-branded cards and general cards. Rewards in co-branded cards can be redeemed only with a specific airline. But there are many exclusive perks.
SBI Cards and Apollo Healthcare has launched a co-branded credit card which would enable customers avail various benefits such as discounted health-check-ups and complimentary consultations.
Using a single card or the app, citizens will be able to pay for their bus travel, shopping at merchants, property bills and also e-commerce
Partner, India FinTech Leader, PwC India
Partner, Payments and FinTech, PwC India
Tel: +91 99 3094 4573