Indian Retail Credit Card Ecosystem
Credit cards have long been a well-liked instrument for making now-and-pay-later purchases.
Consumers are increasingly using internet and mobile platforms to handle their financial matters at the same time. While short-term financing through credit cards is an appealing way to increase purchasing power, banks have the chance to continually engage in digital innovation in order to remain competitive and extend their market share.
Recognizing these changes, We have updated the Indian Retail Credit Card Ecosystem, which encompasses the burgeoning players and segments within the retail credit card space. It’s important to note that this ecosystem is not exhaustive but focuses on retail credit cards.
The selection of players has been based on several criteria, including the company’s size, market share, and popularity. Additionally, the segment’s size and uniqueness of the business model have been key considerations. Emphasis has also been placed on the digital savviness of the company, acknowledging the growing significance of technology in the financial sector.
These current updates highlight the dynamic and evolving landscape of the Indian Credit Card industry, opening up new opportunities and possibilities for players in the market.
Acquirers & Issuers
Public Sector Banks, Private Banks, Small Finance Banks, Payment Banks as well as Foreign Banks can avail a credit card license if they possess a net worth upward of Rs. 100 crore. Now, NBFCs can do so too if they fulfill the same requirement and have prior approval from the regulator. These entities issue credit cards in association with Networks. When a cardholder swipes their credit card, the Issuer must approve and subsequently pass the amount to the Merchant’s bank account. HDFC Bank, State Bank of India, ICICI Bank and Axis Bank are the leaders in this segment.
An Acquirer is an institution that accepts debit and credit card transactions for merchants through POS and Payment Gateway. Essentially, any bank can offer these services to merchants.
Payment Switches enable integrations of the bank’s core credit platforms with Networks and thus facilitate communication with ATM, POS, Payment Gateways. It works to route and authenticate transactions between the different participants, i.e. the Acquirer, Network, Issuer, Payment Gateway and POS.
KYC/ AML / Risk Management
These companies provide solutions to businesses that enable them to perform KYC and AML checks on their customers. They also offer digital Onboarding Services for customers and vendors. These tools also use AI/ML algorithms to track the anomaly or change in the data pattern and issue a warning to the businesses about the potential risk. This is pertinent to the Credit Card industry due to the unsecured nature of the credit extended.
Credit Bureaus are entities that assess the creditworthiness of individuals and businesses. They collect various data points from lending institutions such as payment history, outstanding debt, credit utilization ratio, number of loans and credit cards, etc to calculate the credit score. Lenders and Issuers use these scores to accept or reject loan applications. Transunion Cibil, Equifax, Experian and Crif High Mark are the leading bureaus.
Account Aggregators enable the secure sharing of banking and asset data of the customers through encryption, and gives consumers control over the data that is shared with unified consent management. This initiative will enable seamless and strong credit underwriting, which will accelerate the Credit Card Business.
An ATM (Automated Teller Machine) is a banking outlet that allows customers to open or withdraw or deposit cash, balance enquiry and PIN change. ATM manufacturers work with banks to offer services through which the latter earn interchange revenue. Credit cards offer cash withdrawals through ATMs as well.
Networks are entities which provide the railroads for payments and enable cross-border transactions. They support innovation in the Cards segment, and have implemented Tap to Pay Cards and Tokenization process. Their next focus is on IoT and blockchain-enabled payment solutions. Visa, Mastercard, Rupay, American Express and Diners Club are some of the prominent players here.
Credit Card Management System
A CCMS helps financial institutions roll out credit card programs for their customers. These entities provide end-to-end card lifecycle management, such as customer approval, card issuing & logistics, customer specific targeting, engagement, transactions, collections, and more. New players are coming up in this segment which offer plug & play solutions and enable new entrants in this space to launch within months.
Rewards are an integral part of the credit card business model. Companies in this space help create a deep rules-based engagement layer which is tailored to each customer. They collaborate with issuers and Rewards Delivery Vendors to offer cash back, rewards etc.
Rewards Delivery Vendors
These entities create create solutions for issuers, such as loyalty program development, loyalty software implementation and rewards management. They help manage engagement with customers, thus increasing loyalty and the average card spends.
Issuers partner with large merchants, travel service providers and other banks to offer a co-branded credit card. Customers can then earn rewards which they can use on their choice of vendor. Co-branded credit cards are mutually beneficial and help increase customer loyalty and growth. Co-branded credit cards now account for a significant portion of the cards issued.
Fraud Risk Management
Fraud risk management platforms play a critical role in the retail credit card ecosystem by helping to detect, prevent, and mitigate fraudulent activities related to credit card transactions. As the use of credit cards continues to grow, so does the risk of fraud, making these platforms essential for safeguarding the interests of both consumers and retailers.
3D Secure platforms, also known as 3DS or 3D Secure authentication, play a significant role in enhancing the security of online transactions within the retail credit card ecosystem. Developed by major card networks like Visa (Verified by Visa) and Mastercard (Mastercard SecureCode), 3D Secure is an additional layer of security that helps prevent unauthorized use of credit cards and reduces the risk of online fraud.
Tokenization platforms play a crucial role in the retail credit card ecosystem by enhancing security and privacy during payment transactions. Tokenization is a process that replaces sensitive payment card information, such as the credit card number, with a unique identifier called a token. This token is meaningless and useless to hackers or anyone who intercepts it, making it a secure alternative to traditional card data storage.