India Investment, Stocks, Credit Card and Retail Forum
Credit Cards / Loan Products in India => India Credit Cards / Personal & Business Loans => Topic started by: resh on February 09, 2020, 12:33:57 PM
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80% of the Credit Card Industry in India is controlled by just Top 5 Players. A strong inherent customer base (HDFC, SBI, ICICI, Axis, Kotak); b) dominance in merchant acquiring (HDFC, SBI, Citi, ICICI, Axis); and c) strong analytics &partnership capabilities (essentially foreign and private banks). Inherent customer base (low acquisition cost, ~50% of external sourcing), better merchant acquisition infrastructure (enable better throughput, customer retention through reward points & cash backs) and strong analytics (better
know-how of customer transactions) impart private banks an edge.
A vital part, which is often overlooked, is the development of merchant acquisition infrastructure (essentially POS) and the associated cost. This, while underappreciated, is important as: a) it enables better throughput, customer retention through reward points & cash backs b) entire dynamic of fee structure changes if the issuing & acquiring bank is the same; and c) strong analytics (better know-how of customer transactions).
The Card POS infrastructure dynamics will essentially play in favour of larger banks (http://www.dalalstreet.biz/forum/india-credit-cards/what-are-key-issues-for-pos-infrastructure) giving the man impregnable moat (atleast in the near to medium term). Moreover, fee dynamics change significantly when the issuer and acquiring bank are the same.
This imparts a strong competitive advantage to incumbents who have developed scale to mask the associated cost (given scale of operations) and is challenging for a player new into the game.