WHY have all leading credit card marketers gone on a rampage in the last few months? There has been a flurry of promotional schemes, huge new investments have been announced, and a number of tie-ups and collaborations have either been set up or are on the anvil. Strange, cynics would say, for aren't there not one, not two, but seven clear reasons why credit card usage cannot grow beyond a certain level in India?
Over and above these are niggling problems of reluctant merchants, postal delays, lack of quality customers who do not pay on time or gullible consumers who don't understand the interest mechanics. "After all even in a country like America, beneath the media hype, only about 20-25 per cent transaction actually take place on cards," says a detractor. "The bubble will burst."
Some bubble, though. In 1995, MasterCard grew by 106 per cent in India, the highest growth in the Asia-Pacific region, followed by Taiwan (104 per cent) and Thailand (71 per cent). In April 1996, there were one million MasterCard holders in India. Visa, despite its late entry in India, has over half a million cardholders and has achieved a 94 per cent growth in volumes over the last year. American Express, which introduced the rupee card in India in 1993-94, recorded a 102 per cent growth in billings in 1994-95 which went up by 135 per cent in 1995-96. The average Amex cardspend increased by 3 per cent in 1994-95 and rose by 15 per cent the next year. Credit cards is arguably the fastest growing consumer industry in India.
"As the Indian economy matures, the government will gain confidence in letting the rupee float freely. This will give the card industry a major fillip in terms of pushing state-of-art products tailored to suit every need," says Chandra Agnihotri, head of Visa International for Asia-Pacific.
"The black economy is perceived as a hurdle but all that is changing fast. Manmohanomics has seen the tax net spread wide and far, and more and more people are realising the wisdom of staying clean and above law," says Ajay Bhalla, director, MasterCard. "India, in fact, has a unique advantage by virtue of being a late starter in the cards game. The learning curve has become shorter and card companies can avail of the worldwide cumulative experience of credit business systems," says Sunny Sannon, regional business consultant for MasterCard.
MasterCard is going for the kill with a target of two million cards by 1997. "We plan to increase our share of card spending to above 20 per cent by the turn of the century," says Sanjay Rishi, business unit leader, American Express TRS. "We are talking of 15 million potential card-users by AD 2000 and we are heavily investing in technology both at the core back end and the visible front end to sell convenience and efficiency to our customers," says Farhad Irani, head, bank card division, Standard Chartered. Even nationalised banks, like Bank of Baroda and Canara Bank, are plotting an ambitious growth.
The strategy's changing, from the earlier machine-gun approach—bombard potential customers with advertising and discount offers and get as many of them as possible into the fold—to focusing on the number and volume of transactions per card , on ensuring quality customers who do not default, use a particular card over competing products and more often. "In 1992-93, when we set up our card division, the key challenge was visibility and product features as against value for money, setting up systems and getting processes to run. Today the biggest challenge is service: how does one make sure that 85,000 customer phone calls that we receive every month from customers are picked up on second ring and the queries addressed? That's imperative," says Irani. "The key to success today is to anticipate and respond to the changing financial and lifestyle needs of consumers through better services and benefits," says Sanjeeb Choudhuri, business manager, Citibank. American Express, with its declared aim of becoming the "world's most respected service brand", has just launched an aggressive media campaign selling its membership rewards programme.
The industry is clearly in overdrive. There are new initiatives in:
Marketing: Co-branding is catching up. The Citibank-Philips card launched in March offers all the facilities of the normal card plus a six-month guarantee on Philips products. Stan-chart has launched a similar card with Mahindra & Mahindra. The advantages: sharing of servicing and promotion costs and dipping into each other's customer base. Advertising spends are rising. American Express is currently marketing a programme wherein for as little as Rs 40 members can earn a point; accumulated points can be redeemed for free miles in flying or gifts of choice.
Service-orientation: American Express provides an emergency valet service at airports to take care of passengers. It replaces all cards in two days, and regularly carries out customer satisfaction surveys to fill possible gaps. Citibank's Dial-a-draft facility aims to save customers from making rounds of the bank or make payments where plastic is not acceptable. "Success in the cards game is a function of being able to provide the right value proposition to the right customers in the right business segment," says Rishi.
Technology: Both Visa and MasterCard are extending their ATM networks, Cyrus and Plus, to member banks. This would effectively mean that a Stanchart cardholder need not go to a Stanchart ATM for cash, but his card would be acceptable at any of the Citibank, Hongkong Bank or ANZ Grindlays ATMs. "I see a 300 to 500 per cent increase in computerisation in the coming years," says Irani. Citibank has a sophisticated automated voice response system which allows cardholders to have a fax-back option for statements, account balance and credit line.
Risk management: Data suggests that as much as about 75 per cent of the frauds occur on stolen, lost or never-reached issuances. Other petty ways are providing wrong addresses and phone numbers, multiple imprinting by merchants on charge slips when the customer is not looking, forging signatures and billing him later, and so on. Today 75 per cent of all new cards being issued are photocards. Visa, MasterCard and American Express have evolved simple procedures and tips to detect fraud and often educate staff and merchant establishments on these. Banks are initiating debt collection activity before the cardholder turns absolutely delinquent. "We have systems in place that will enable us to remain way ahead of the smart alecs," says Agnihotri.
Training: Both Visa and MasterCard run extensive training programmes for merchants and bankers to improve customer service. MasterCard has even set up a full-fledged MasterCard University to train card companies.
Customer convenience is, of course, the driving force for all these initiatives. "Once consumers achieve a sense of convenience in using the card, what seems like major obstacles to growth would become mere speedbreakers for the industry that has miles to go," says Bhalla. The statement does have a logical ring to it.
