HDFC Bank taps partnerships to scale up credit cards business

India's largest private sector lender HDFC Bank is stitching new partnerships as it looks to strengthen its credit card business.

The bank is already the market leader with over 17 million credit card holders. But with the bank's customer base grown to over 100 million post the merger of its parent HDFC, the lender sees a huge opportunity to scale up the business.

"Today 70-75 per cent of our acquisitions are from customers who have bank accounts with us and the balance 20-25 per cent is what we call open market. Because of this gap between 17-18 million to 100 million, the headroom to grow continues to be very large and therefore we are very bullish about the growth in the cards space, " said Parag Rao, country head - payment business, consumer finance, technology and digital banking at HDFC Bank.

One way to attract new customers to the credit card space is through partnerships to launch co-branded cards.

On Thursday, HDFC Bank launched such a co-branded credit card with Marriott Bonvoy, the travel programme of the global hotel chain Marriott.

This is the first co-branded hotel credit card in India and will run on Diners Club.

Customers who opt for this card will get Marriott Bonvoy silver elite status and will earn Marriott Bonvoy points on spends, apart from other benefits. There will be higher reward points on purchases at eligible hotels participating in Marriott Bonvoy. Marriott has around 186 million loyalty members globally and the members who are from India will be the initial target customers for this card.

This is one of several such co-branded partnerships that HDFC Bank has inked to boost its credit card business.

Earlier this week, HDFC Bank and food and grocery delivery platform Swiggy had launched a cashback card, where benefits included 10 per cent cashback on various transactions done on the Swiggy app.

In March, HDFC Bank had launched a co-branded Rupay credit card with Indian Railway Catering and Tourism Corporation (IRCTC). The company also has co-branded credit card in partnership with Tata Neu, the super app launched by the Tata Group, where customers earn rewards in the form of Neu coins on the app.

Other banks too have such partnerships. For instance, ICICI Bank has a co-branded card with Amazon Pay and Axis Bank has co-branded cards with airline Vistara and e-commerce platform Flipkart.

The Reserve Bank of India had imposed restrictions on HDFC Bank on sourcing new credit card customers and new digital initiatives following repeated technology outages. Those restrictions were lifted in March 2022. Since then the bank has seen strong growth and has been growing market share through the launch of new cards and partnerships like these.

"We have grown our value market share in the last two years, which is based on the pillars of deep engagement, and focusing on customer wallet and aggregation of spends. At the same time, we will continue to identify relevant merchant categories where we see customer spending and focus on getting the best of partnerships where we offer significant value and thereby by get the full customer wallet," said Rao.

HDFC Bank's credit cards push comes at a time when the Reserve Bank has raised concerns over rising defaults in the credit cards industry.

In its latest Financial Stability Report, RBI pointed out that gross non-performing assets in credit cards for state-owned banks had surged to 18 per cent as of March 2023 from around 9 per cent a year ago. Private sector banks gross NPAs in credit cards were at 1.9 per cent.

HDFC Bank said it hasn't seen any stress rise in its credit cards portfolio.

"To have a good asset portfolio is to have stability in your underwriting practice, which means essentially know whom you want to source and whom you don't want to source. Number two, in-depth, very focused portfolio management, looking at early warning signals on delinquencies, and looking at indicators; these are extremely essential to be able to flag off what is going to happen and then you have mitigant measures to manage that, said Rao.