2024/12/12 16:31 pm
Co-branded credit cards are growing twice as fast as ordinary credit cards redefining embedded financing solutions. These tools are becoming the vanguard of the new era of consumer financing. These cards are created by partnerships between the banks and brands that offer tailored rewards and exclusive benefits. These benefits make them uniquely attractive. The share of co-branded credit cards has surged from 3-5% to 12-15% of all credit cards issued in just four years. They are projected to capture over 25% of the market share by volume by FY28. One-third of the credit cards issued in FY24 are co-branded credit cards. According to a Redseer Report, from FY24-28, they are expected to grow at a CAGR of 35-40% compared to the ordinary credit card growing at 14-16%.
Factors influencing the growth of Co-branded Credit Cards-
·Evolving Brand Loyalty- The younger generation tends to identify with the brand and intends to create a deeper connection and a sense of belonging with brands.
·Perks and Rewards- These credit cards partner with specific brands to offer discounts and rewards on purchases based on the unique purchasing habits of the consumer.
·Personalized benefits for every lifestyle- Cobranded credit cards bring a level of customization that caters to individual preferences.
India is one of the fastest-growing economies and is poised to become the third-largest economy by 2028. India’s economic ascent is being driven by a significant change in consumer behaviour induced by increased income, urbanization and increased digitalization. Since early 2000 there has been an increase in discretionary spending on non-essential goods and services which accounts for more than 30% of the Private Financial Consumption Expenditure (PFCE). Households are disposing of their incomes more towards aspirational purchases, indicating the shift from needs to desires and a growing middle class.
The surge in consumer spending is being supported by two major modes of payment UPIs and credit cards. UPIs are convenient and widely available, so are playing a driving role in consumer spending. According to one RBI estimate, between FY21-FY24 UPIs account for 28% of the PFCE spending. On the other hand, the use of credit cards surged from 5% of total PFCE spending in FY21 to 10% of total PFCE spending by FY24. This can be attributed to the psychological aspects of making purchases on credit, reducing the immediate impact of spending along with various tempting rewards and benefits from brands to increase purchase affinity. These increased adoptions of credit cards have paved the way for more specialized financial products.