Digital payments have picked up significantly over the last few years in India. While UPI (unified payments interface) remains the dominant platform for such payments, credit cards, too, have been growing strongly, with more and more people embracing its convenience.
According to consulting firm PwC, 16 million credit cards were added in 2023-24, and there are more than 100 million cards currently active in India. Transaction volumes and value have also risen 22 per cent and 28 per cent, respectively. PwC estimates the number of credit cards to touch 200 million by the 2028-29 financial year.
Allowing RuPay credit cards to link to UPI has been a boost for credit card growth. On an average, credit card transactions via UPI occur 21 times a month, which is four times more frequent than traditional physical credit cards, according to PwC. Overall, credit card transactions are likely to increase 21 per cent in volume and 18 per cent in value, leading to an estimated 9 billion transactions and total spending of Rs40 lakh crore by 2028-29.
Loyalty and rewards programmes are another reason people, especially the Gen Z, are finding credit cards attractive. As the usage and penetration have grown, card issuers have tapped in to the vast ecosystem, inking partnerships for co-branded credit cards that come with even more benefits, such as cashbacks on popular online platforms and accelerated rewards on partner merchants.
For instance, in October this year, SBI Card launched the KrisFlyer SBI Card in partnership with Singapore Airlines. Users of this card can earn KrisFlyer miles (Sinapore Airlines’ frequent flyer programme). ICICI Bank partnered with online travel portal MakeMyTrip to launch a travel-focused co-branded credit card where users get rewards in the form of myCash, MakeMyTrip’s reward currency. Yes Bank partnered with fintech platform Paisabazaar for a co-branded credit card earlier this year.
Despite the growth, India remains an underpenetrated market for credit cards, according to Abhijit Chakravorty, MD and CEO, SBI Card. This, he says, creates opportunities to tap into the market across various segments, including lifestyle, retail, travel, fuel and more.
“Co-branded credit cards offer a range of advantages that appeal to consumers, credit card issuers and partners. These cards feature customised reward programmes that align closely with spending patterns, offering perks enhancing consumer experience,” he said.
For consumers, co-branded credit cards simplify spending by offering higher rewards on everyday purchases in sectors like retail, fuel, travel, dining, e-commerce and groceries, among others, and unlike generic rewards, these cards provide specialised offers.
According to a report by Redseer Strategy Consultants and Hyperface, a platform for credit cards as a service, co-branded credit cards accounted for 12-15 per cent of total credit cards in the financial year 2023-24, and their share could exceed 25 per cent by 2027-28.
E-commerce dominates the co-branded credit card landscape, commanding 75-80 per cent of all issued cards, with the Amazon Pay ICICI Bank and Flipkart Axis Bank credit cards leading the charge, and collectively accounting for about 9 million cards, said the report. Travel sector holds 8-10 per cent market share of co-branded cards, while the dining and entertainment sectors represent 3-5 per cent.
Co-branded credit cards are an excellent way to create value for both customers and the partnering organisations, said Chitrabhanu K.G., senior vice president and country head for retail assets and cards, Federal Bank. It is a win-win for the issuer, too. “They are an efficient way to acquire and engage customers. These partnerships allow us to tap into the partner’s existing loyal customer base, which makes targeted customer acquisition easier. Moreover, the exclusive benefits and rewards keep customers engaged and deepen loyalty―both to the bank and to the partner brand,” said Chitrabhanu.
From a lender perspective, co-branded credit cards also offer cross-selling opportunities, where customers could be introduced to other banking products.
To maximise the benefits of co-branded credit cards, users should strategically align their purchases with the card’s offerings and actively utilise its features.
“Familiarising yourself with the card’s reward structure is a great starting point. The cardholder can make purchases that earn maximum rewards, such as shopping at partner outlets or using affiliated services where accelerated points, cashback, or category-specific discounts are offered,” said Chakravorty. Reward points yield better returns when redeemed for products, services or vouchers from the partner brand. By actively using the card for relevant purchases, the value of rewards and perks should ideally outweigh the cost of the fee, he said.
While co-branded credit cards present a great opportunity from an engagement and growth perspective, these partnerships need to be carefully calibrated, cautioned Chitrabhanu. “These partnerships can be heavy on costs, with revenue-sharing agreements, marketing expenses, and rewards structures that are often customised to the partner’s ecosystem,” he said.