The Hindu Business Line : Premium credit cards growth doubles

Mumbai, Aug. 22 Premium category credit cards have seen 100 per cent growth on a year-on-year basis and some senior bankers expect it to grow at over 50 per cent against expected growth of 25-30 per cent for regular credit cards.

Premium category cards are credit cards with higher credit limits and some additional benefits to attract high-end customers. The spend pattern on such cards is usually higher than the normal credit card portfolio of banks.

Mr Santanu Mukherjee, Country Manager-South Asia, Visa International Asia Pacific, said: “The number of such cards and spends on them have seen a tremendous growth.”

These cards currently account for less than five per cent of the total card base, but the spend and income generation from such cards are more than 10 per cent.

“The revenue generation opportunity from such card comes mainly from interchange income,” said Mr Sachin Khandelwal, General Manager, Head-Cards Product Group.

Interchange fee is paid by merchant-acquiring banks to cardholder-issuing banks in order to cover the cost to convert a charge on a cardholder’s card to a cash deposit at the merchant business checking account, including cost factors such as billing services, credit and fraud risk, profit, etc.

“Fee revenue is also a significant component, as such cards come with features and benefits some of which are charged to the customer,” said Mr Murali M. Natrajan, Regional Head-Consumer Banking, Standard Chartered Bank.

The operating cost on these cards is higher than that on average credit cards in circulation.

“Premium cards come with add-on benefits and features such as insurance cover, lounge access and other such benefits which have a cost to the bank,” said Mr Natrajan.

“As these cards are targeted at more affluent segments that largely use the cards for convenience and for the benefits offered, the risk or rate of default is much lower than the mass-market segment,” said Mr Parag Rao, Vice President and Head-Credit Cards and Product Portfolio, HDFC Bank.

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