Dealing in debit

Purvita Chatterjee

While nobody is willing to part with hard cash these days, card purchases are fortunately on the rise. Although most credit card companies are already operating various schemes, marketers think it is time to target the nascent debit card industry to get some buying done.

Bill Gayab screams the latest Visa debit card promotion, in a bid to boost some consumer spending during the current slowdown. A relatively new concept, debit card issues are increasing, but whether spends on the cards will follow remains to be seen, especially at a time when people, cutting across sections, are tightening up on their spending.

Maintains Vikram Modi, Director, Business Development and Marketing, South Asia, Visa International, We cannot afford to ignore the general sentiment, where there has been depressed spending. We have to be proactive about it and incentivise the consumer to ensure some spending.

This is more so for a new industry such as debit cards, where the money to be spent has already been written off by the debit card holder who treats it as an electronic purse or an online ATM card depending on whether the money is already available in the bank account - a distinctly less attractive proposition compared to a credit card which is more like a loan which can always be repaid. But at the same time there are people who are averse to loans and this is where an online savings\current account system of payment can have a future.

Realising the potential of the debit card industry, Visa has unleashed a pan-India promotion to widen the base of its debit card spenders. This time the base is larger, unlike our previous scheme which was restricted to Mumbai, states Modi, who is still not willing to discuss the success or failure of the scheme. Just three weeks since its roll out, the expectations are somehow high in spite of not much headway having been made in this industry.

The scheme gives its debit cardholders an opportunity to enjoy some free shopping if they happen to spend during 12 randomly selected slots, each five minutes long. Any item purchased in those five minutes by a customer would mean a refund of that particular bill amount. The promotion is on for a 60-day period from November 1 to December 31, across the 25,000 Visa Electron merchants spread across 35 cities in the country.

While the 7,50,000 Visa Electron members may get excited over these magical moments there is no doubt an overall slowdown in spending which is affecting the economy. But the debit card is a product directly related to ones bank account and is meant to be used for everyday purchases, and nobody can stop buying essentials for daily use. Hence, a debit card is expected to be more frequently used - recession or otherwise. Explains Modi, Since debit cards are meant for daily use, it is insulated from any kind of changes in the economy. Visa has consciously decided to launch Magic Moments to beat the mood of the consumer.

The expectations are higher compared to those of last year and this is not simply because the base is higher. We expect a growth in spends between 200-250 per cent this time compared to the previous year. This is going to be the benchmark for us, states Modi. Besides, he also expects growth in his debit cards spends to be up from the pre-scheme period by nearly 25 to 30 per cent.

These estimates seem much higher than the credit card business where industry growth has been pegged at 27 per cent, with Visa itself registering a growth rate of 43 per cent. However, this season Visa has consciously decided not to push its credit cards as much since it is keen to see some more business happening for its debit card.

Meanwhile, Mastercard International has also concluded a promotion x Priceless Moments, that ran from the end of last year to early this year. This particular promotion ran across all its three brands - Mastercard Credit Cards, Maestro Debit Cards and Mastercard Electronic cards.

States Sameer Vakil, Vice-President & Country Manager, South Asia, Mastercard International, Mastercard International seeks to maximise value to customers by facilitating market initiatives to help our partners grow their business.

The Priceless Moments promotion was based on a contest that required cardholders to make purchases of over Rs 5,000 or use their cards at least five times during the promotion period. The final winner got a family vacation to Australia. According to Vakil, there was an impressive sales growth of over 28 per cent for the scheme.

It was based on Mastercard Internationals internationally successful Priceless Advertising campaign whereby each commercial is a story that leads to a priceless moment (There are some things money cant buy. For everything else theres a MasterCard).

Exulting over the success of the debit card product Maestro, Vakil adds, Maestro is the only debit programme to have grown from zero to over 100 million cards in the Asia Pacific region since its launch in 1993. We are the pioneers in debit programmes and are the first ones to introduce a global online real time deposit access program.

While Mastercard is busy unleashing its international campaigns, Visa has already roped in a local hero - Sachin Tendulkar - to get easy acceptability for its cards. Visa, Go get it, says Sachin, promoting all the products of Visa. In fact, at the time of the launch of Visa Electron, the first 100 card holders of its debit card actually got a chance to meet up with the cricketing genius.

Meanwhile, member banks are quickly launching their own schemes to enhance use of plastic. HDFC Bank, which has already tied up with both Mastercard and Visa for its debit card, came up with a Debit Grab-It Use N Win offer to speed up the usage of its debit cards. A leader in this category, with nearly five lakh cards in circulation, HDFC Bank was the first private bank to launch the debit card in India. Says Neeraj Swaroop, Country Head - Retail Assets and Marketing, HDFC Bank, Promotions do work and there is definitely a jump in spends on the cards. The purpose is to shift from cash to cards rather than from non-purchases to purchases.

While spends on plastic have been on the rise, pegged at nearly a 35 to 40 per cent increase, the base for debit cards is still small. There may be growth happening on the number of debit cards issued but spends on the card are likely to decrease as the base for this card expands. In this scenario, schemes to promote buying will always help the debit card industry keep the growth on spends healthy. But in terms of impacting total spending in times of a slowdown, debit cards still have a long way to go. It is still too small a pie to affect overall spending in the economy, states HDFCs Swaroop about an industry that has yet to mature.