The Hindu Business Line : Now, cash back on debit cards to promote spends

Kolkata, July 16 How about getting back a percentage of the money spent on a new LCD television, clothes or the monthly grocery? This may be possible now because banks are offering a cash back facility on debit cards to encourage customers to use more of the plastic money.

Customers can avail themselves of up to ten per cent cash back on debit card (the percentage varies from bank to bank), which are directly linked to the account.

Debit cards enjoy various advantages over a credit card. Unlike credit card, there is no fear of overspending and no penalty and interest charges for late payment. Receiving cash back on debit card is therefore a better proposition for the customer, said senior bank officials.

Banks usually announce such schemes during the festive season, while some banks have such schemes running throughout the year. Some banks offer it on specific categories of purchase or spend, such as on fuel recharge.

Banks, however, do not provide cash back on ATM withdrawals and Internet transactions. According to Mr Sai Narain CDK, Head – Consumer Transaction Banking & Strategic Initiatives, Standard Chartered Bank, India, “Consumer research pointed to dissatisfaction with existing reward points and redemption programmes that offered exchange of rewards points with products. Consumers are more interested in instant gratification.”

Thematic offer

Standard Chartered continuously engages customers with round the year thematic cash back offers. “Double the rewards points — implying double the cash back has been the most successful promotion,” said Mr Narain. The bank has seen a 30 per cent increase in customer spends on debit cards last year supported by these promotions.

For banks, higher spends would mean higher income from interchange fee, said a senior bank official at a private bank. “If you can run a campaign of 2-3 months you can see spends increase by 10-20 per cent,” said Mr Sameer Nemavarkar, Vice-President, Retail Banking, Axis Bank.

Activation strategy

Axis Bank offers cash back schemes for certain segment such as for spends on fuel. According to Mr Nemavarkar, while giving such schemes on credit card is a high-risk high-return game and calls for efficient managing of the outstanding; that on debit card is more of an activation strategy.

“We had run a campaign on activation of new cards by offering a cash back of Rs 50 on a spend of Rs 1,000,” he said.

State Bank of India and Barclays have announced cash back scheme beginning July 1, and other banks are expected to follow suit. While SBI gives 5 per cent cash back, Barclays has offered 10 per cent cash facility.

“10 per cent cash back offer will help us strengthen our relationship with our customers and enhance brand loyalty,” said Mr Suresh Gurumani, Director, Retail Banking, Barclays India.

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