Financial Daily from THE HINDU group of publications
Thursday, May 30, 2002
Money & Banking - Credit Cards & Debit Cards
Playing the right cards
WHEN a happening music channel and a well-known media house decide to launch youth-centric credit cards, it could well mean that the booming credit card business in the country is on the verge of graduating to a new level. From an earlier strategy of pushing plastic into the hands of consumers, it is now segmenting that is leading this business. Every card company is eyeing the youth segment with an attempt to put more purchasing power into their hands.
For instance, the MTV Citibank Credit Card has been designed specifically to address the lifestyle needs of the youth and the young at heart while the Times i Card allows parents to provide their teenage kids an ideal substitute for pocket money with significantly enhanced controls.
Taking the lead in tapping this segment is Citibank, which has been steadily increasing its credit card portfolio. Since April last, it has tied up with MTV and the Times group to introduce a primary and an add-on youth credit card, respectively. Explaining the strategy, T. R. Ramachandran, Marketing Director, Credit Cards, Citibank, says, "In the past, the aim of most credit card companies was to get people to use plastic; the approach has now moved to a size-fit approach. The strategy is one of segmentation by having a relevant product for every segment."
Estimating the youth credit card market to be between 10 million and 15 million users, Citibank intends targeting this segment which has the highest propensity to spend and adapt to new products. In fact, in spite of having tapped into segments such as women, passengers of Jet Airways and PSUs like Indian Oil to launch co-branded cards, it is the youth segment which portends the highest growth for its credit cards. As Ramachandran says, "We expect a 40 per cent growth rate for our co-branded youth card with MTV compared to the 25 per cent growth rates for the rest of our portfolio of cards."
It was in April last year that Citibank decided to launch a co-branded card with MTV, a channel that appeals to the youth. Offering all the features of Citibank's silver international card, the credit card offered discounts and freebies at almost 100 outlets ranging from discotheques to restaurants - areas frequented by young people. This year, the MTV Citibank card has close to 300 feature partners ranging from bowling alleys to cyber cafes, ensuring youngsters get the discounts they are looking for.
While both the partners and bank are likely to benefit from the use of the co-branded credit card, in the case of MTV, its foray into retailing is also expected to get a boost on spends on the card. MTV Style, the brand of apparel launched nearly two years ago and stocked at nearly 300 outlets, is expected to get more sales through the use of its card since it is directly giving a discount of 10 per cent to the MTV card holders. Besides, MTV Style has prepared a catalogue of garments which is exclusive to MTV credit card members.
Sanjeev Hiremath, Director, Network Development (South Asia), Licensing & Merchandising, MTV India Pvt. Ltd says, "Our target audience is the 18-35 age group and the card gives a host of youth-related benefits. Our co-branded card for youth already has a base of 50,000 issuers and we expect it to cross the one lakh figure this year."
Based on the success of its existing youth card, MTV is working on yet another youth card with Citibank in terms of going down the age ladder and targeting the 15-18 year olds, with flexible credit limits. "We are working on a path-breaking product which will be an extension and variation of our existing credit card. Citibank is already working on it and we are awaiting Government clearance to launch it," he adds.
The company also plans to launch the MTV Citibank card in countries across South-East Asia.
Meanwhile, according to an internal study done by MTV, the maximum spends (42 per cent) on its card came from restaurants, pubs and hotels, followed by spends on fashionwear, garments, jewellery (23 per cent) and music (23 per cent), bowling, pool and video games comprised five per cent of the spends, while discotheques and sports stores accounted for the rest. The study showed that Delhi had the highest number of its cards (40 per cent) followed by Mumbai at 15 per cent. Cross-selling across existing Citibank's cardholders resulted in 23 per cent out of the total number of cards issued.
Likewise, Times Retail (through its nine Planet M stores) should also get the benefit of added sales by the use of the Times i Card. States Ajay Mehra, Chief Operating Officer, Times Retail, "It is a status symbol for the youth. The concept of a good branded youth credit card is going to work."
Besides, co-branding with the Times group is expected to spill into its other ventures like Times Music and Radio Mirchi (its FM station) where there could be synergies waiting to be exploited. States A. L. Sriram, Head, Times Card, The Times of India group, "Entertainment has a transaction value and considering the Times group wants to pervade every entertainment space available ranging from radio to shopping, there is no reason why the newspaper group cannot deliver in this business."
For instance, through its portal Indiatimes.com, teenagers can actually use the Times i Card to buy goods. Claims Sriram, "We believe in delivering right into the hands of teenagers who are the big spenders and influencers with relevant controls resting with their parents." From online transactions of the group to ground level events like the Filmfare awards and premieres of films, the Times Card could be used to access passes and discounts.
Elucidates Brij Mohandas, President & Head, Corporate & Emerging Business, Venture Infotek, a consumer payment processing company providing integrated end-to-end card payment processing solutions for both issuing and acquiring banks, "The tie-ups matter since Citibank uses the partner as a marketing platform. After all, no one can match the media exposure of the Times group or for that matter, MTV, which the youth look up to as their channel. The banks are going after this segment considering the increasing spends happening in areas like recreation, clothing and eating out. This segmentation will continue since the market is maturing."
Co-branded cards always help as a marketing tool, especially if there is an association with a media company. Adds Vivek Kudva, Country Head, Personal Financial Services, HSBC, "Tying up with a media house immediately brings to the table large publicity at a reduced cost which makes it a great opportunity to promote the concept. The challenge in this case is to appeal to the large mass of youth across a country which is not homogeneous."
In the meantime, other foreign banks continue to consider the youth segment. States Shyam Srinivasan, Head, Credit Cards, Standard Chartered Bank, "Although the youth credit card market is not throbbing right now, we are eyeing it and waiting for the right opportunity to enter this segment."
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