Friday, June 10, 2005

[MP] Indian Credit Card Industry – A Perspective

A question was asked a few days back on the Credit Card Industry in India, and how to market that in the Indian Markets.
Based on the limited experience in the Credit Card Industry, following were some of the inputs I had to offer:

My Response

To study the Credit Card Industry in India, from my experience and perspective, you would need to tap the following resources and ideas:

(a) There have been quite a few White Papers published on the Credit Card markets in India - You can refer to the backdated issues of Business World/BT/Student Papers/Indiainfoline (I am not sure of the date though).
My take is that why start from scratch when someone has already put in effort to collate data. You can leverage that and work on it.
(b) Get in touch with a few front-line executives who would be able to route you to the correct resources - to get information on these.
(c) A major chunk of the market of Credit Cards is held by HSBC and ICICI. You should read up on these banks specifically.
(d) What are the loopholes in the Credit Card Market today - to get this, do an analysis of the policies and the business startegy that Indian Banks like PNB and HDFC are following. If you carefully observe, you would identify the competencies that they lack, and the AOIs they need to work upon.

As Manzoor mentioned, you WOULD NOT get this data from the banks, naturally, since
(i) Banks dont openly discuss Business Strategy, especially when it is for a Nascent potential market like Credit Cards,
(ii) Nobody is comfortable in discussing his/her weaknesses!

(e) Also, I would suggest another aspect that you need to look into - International Markets. The US is a much maturer market for Credit Cards, and a few steps behind is the European Market.

In fact, that is where the revolution in India is routed from. If you can study these markets a bit, you have all the information laid in front of you - The Past, the Present and the Future. What the market was in US a couple of yeard back, thats the face of the Indian market today. Study that market, and you would get your answers.

Lastly, and this would be significant for you in reading the markets: Whereas in the US and Europe, most of the Credit Card processing is handled by Processors (First Data,etc), who in turn interact with Visa/Mastercard/Amex, in India, most of the banks are their own processors - and interact directly with Visa/Mastercard/Amex.So you would need to tap the Credit Card Division of the major banks itself, the ones I mentioned before.

Finally, just to sum it up, this is what is my take on the Achilles heel of the Credit Card industry:
1) Consumer Spending power: This is catching up with the growing economy, hence, the boom in the market,
2) Lack of established Merchant Services: At POS, the processes are still not streamlined,
3) Security - Major AOI for Credit Cards - As the Numbers increase, this is one area that one needs to work upon,
4) Competition - both from a national perspective, with discounting offers, and new entrants, and from International Perspective - with foreign players expediting their Indian Ventures,
5) Consumer behavior - This is the quintessential reason for the Market dynamics - One needs to tap the "Security" aspect of the Indian Consumer - wherein the Consumer spends more than he has in his put it crudely! This perception is what is being gradually changed in the market.
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