HDFC Bank is planning an aggressive comeback in the credit cards space, with a target to hit 0.5 million customers per month in the next six months, following the lifting of the Reserve Bank of India ban on sourcing new credit card customers.
“In November 2020, we had hit a run-rate of incremental issuance of 300,000 credit cards a month. So, our immediate milestone is to hit that in the next two-three months. Our next milestone will be to hit 0.5 million cards a month, which we expect to happen over the next two quarters. Over the next three to four quarters our clear aim is to regain the number market share, which we have lost,” said Parag Rao, group head, payments and consumer finance, digital banking.
In December 2020, RBI imposed several restrictions on HDFC Bank following multiple outages in internet and mobile banking channels of the country’s largest private sector lender. The bank had to temporarily stop all launches of the digital business generating activities planned under its Digital 2.0 plan and other proposed business generating IT applications and sourcing of new credit card customers.
The lender got a partial relief last week when the embargo on sourcing new credit card customers was lifted by RBI. It has submitted concrete plans to the regulator to address the other issues, said Rao.
“As a bank, we have been in constant touch with the regulator over the past eight months, we have discussed and submitted our short-term, medium-term and long-term plans to remediate some of the observations raised not just by the RBI, but also the third-party auditor. We have submitted these plans with concrete timelines, milestones of remediation. The lifting of the embargo on credit cards is a positive step, which is probably indicative that the regulator has clearly taken into account the changes, which we have implemented,” said Rao.
The lender has planned several initiatives to strengthen the bank’s infrastructure and capabilities, as well as to enhance customer experience. As a part of this, it's creating a multi-channel 24x7 customer experience hub.
The lender will look to launch new products as well as relaunch some of the existing offerings in the credit cards space, making them much more powerful, as it looks to attract more customers to credit cards.
According to analysts at Motilal Oswal Financial Services, HDFC Bank had a credit card base of 14.8 million as on June 2021, but, the bank has lost 0.6 million cards since the RBI embargo. During that period, rivals like ICICI Bank, SBI Cards and Axis Bank have added 1.3 million, 0.75 million and 0.3 million new cards respectively, helping them ramp up their market share, they pointed.
“HDFC Bank typically adopts an aggressive stance during the festive season. It offers various discounts on consumer durables to drive spends and accelerate growth in the consumer durables financing. The lifting of RBI restrictions before the festive season, thus augurs well. We expect the bank to turn more aggressive on credit cards over the next few months,” said the Motilal Oswal analysts.
The bank has already been growing its liability franchise and targeting them to source a fundamentally large portion of incrementally new credit card customers, will be a big focus.
“We have always maintained that a large portion of our portfolio will be our internal bank customers, who have a liability relationship with the bank. The strategy has given us huge amount of benefits and we see no reason to deviate from that plan,” Rao said.
Partnerships and strategic alliances is another step that the lender is taking to strengthen its offerings. HDFC Bank has over 20 activities that it has planned to bring to the market.
“Our second important strategic vertical is working with a lot of partners, across segments, categories, with the idea that two strong partners can get together and offer a strong value proposition,” said Rao.
On Monday, HDFC Bank and fintech major Paytm announced a strategic partnership aimed at providing solutions across payment gateways, POS terminals and credit products including, buy now pay later (BNPL), Eazy EMI among other solutions.
The merchant acceptance space is extremely large and it's continuously growing. Rao said that a significant portion of India’s growth consumption story is going to happen through this electronic network and therefore, it was imperative that financial institutions invest in the acceptance space, enabling merchants, traders to shift from cash to electronic means of accepting and making payments.
“HDFC Bank is the leader in the merchant acceptance space, with a 45 per cent plus share in the acceptance network. The strategic alliance with Paytm brings HDFC Bank’s strengths in the merchant acceptance space to the table and Paytm is also a large merchant acquirer and brings its technological platform strength, the capability to build very strong digital products,” pointed Rao.
HDFC Bank shares have gained some momentum since the RBI lifted the embargo on sourcing new credit card customers. On Monday, the stock was up over 1 per cent at Rs 1,530.40 in intraday trading.
