Card for cash
By Peeyush Agnihotri

IT’S a game of cards. The players — financial institutions. The stake - market share. Hold your breath! War is on the cards or more precisely cards are on a war.

Credit, a dreaded word not long ago, has suddenly become the buzzword and credit card, unheard of till some five years back, has become the latest mantra. Propelled by the recession bug, corporate sector and individuals are keen to buy on credit, and credit cards are being eyed as the best option. To top it, even the government does not want to ban this plastic, for it is a cash cow.

If 1998 was the year rattled by Bills (telecom, IRA, women’s reservation, not to forget Clinton), the year 1999 could well be termed as the year of cards, if the past two months are any indication. Tourist spots, booking counters, shoe stores — The snazzy rectangular piece of plastic is omnipresent.

Credit cards are no longer confined to the suited pin-stripped tycoon’s wallet or jean-clad girlfriend-happy rich brat’s pocket. It is now a prerogative of dhoti-donning farmer as well. Triggered by NABARD’s model scheme for kisan credit cards, State Bank of Patiala has taken the plunge in this yet-virgin market segment and is already wooing farmers with its SBP Kisan Cards in Punjab and Haryana. This way the bank hopes to notch up production credit flow to the agricultural sector. Punjab National Bank has also launched krishi card on almost the same pattern in Ropar district. The bank also launched zimidara card with much fanfare this week.

Prudently, financial dons are leaning on corporate mammoths for support to make their product the best bet. A classic case of "we help each other." Want to book a railway ticket? Standard Chartered Bank has joined hands with the Indian Railways to launch a co-branded credit card for providing the facility of telebooking. Want to book a Maruti car? — The Maruti-Citibank-Visa Card can do that for you. Want to get your petrol tank filled? — Bharat Bobcard premium may come handy.

What’s more is that banks are going out of the way to offer special privileges. Cancard Visa, for example, gives the holder an access to mega events, including cricket matches at key stadia. American Express offers membership reward points every time a card is used. These points can in turn be used to redeem a wide range of goodies. The more one spends the more points one earns.

There are cards that suit everyone’s pocket. Bobcard has a pack of six up its sleeve. So you have Bobcard, Bobcard Silver, Bobcard Exclusive, Bharat Bobcard Premium, Bobcard Global and Bobcard Gold. For plain Bobcard one has to have an annual income of Rs 75,000 per annum, whereas you have to be in the Rs 2-lakh pa income bracket if you are eyeing Bobcard Gold.

Defying all logic, it is one business that is growing despite inflation, glum market scenario and sagging profits. The market is zooming skywards with an almost 18 per cent growth rate and since 1993 the spending by cards has increased 7.5 times. In 1997, in India, 3.1 million credit cards were issued and people spent Rs 700 billion by using credit cards. Citibank issued 10 lakh cards in that year alone.

"We are growing by 25 per cent per year, " exclaims an ecstatic Paramjit Singh Suri, Manager of the Bank of Baroda’s Bobcards.

Undoubtedly, the seeds of growth draw on the growing consumerism. Plastic money is easy to carry and coffers of the credit card user flow copiously, long after the bank accounts show cypher. Or so he believes. "The main objective of the banks is that the process of loan should go on as this gives them more liquidity. Ultimately, it is the middle-income group that feels suffocated when they repay the loans through the nose," says Dr P.P. Arya, Professor, University Business School, Panjab University, Chandigarh.

"What I feel personally is that this system still has a long way to go in India because market leaders like Citibank do not have adequate outlets and those like the SBI, who have a number of outlets, are new in the arena. Then the terms should also be made more easy," Dr Arya adds.

A conglomerate of Asian banks, operating from Singapore, is behind the concept of Mastercard and Visacard, the basic difference between them being that Mastercard gives more insurance cover to a cardholder than a Visacard.

Earlier, the banks used to provide charge card but in the market of cut-throat competition almost everyone is going in for the revolving card facility. The competition is intensifying and players are redefining their marketing strategies.

Bobcard Gold offers a cash advance of Rs 25,000 per month at a charge of 3 per cent and American Express is offering the lowest revolving credit rate of 1.99 per cent. Amex offers an insurance of Rs 10 lakh in case of air accident as against the SBIs Rs 4 lakh, and offers a supplementary card to any of the relatives of the card holder who is above 18. "We also offer a unique balance transfer service at 1.45 per cent that enables you to pay off dues on other credit card," says Anuj Kalra of Safeway Inc, an outlet of American Express Amex cards.

Even something as innocuous as a brochure is being made snazzy, "inviting" and tantalising. "Introducing the currency of modern India," says the SBI, "As good as gold in your pocket," screams Bobcard and "A sign of your success," says the Amex card.

Marketwise, Chandigarh is being viewed as ‘meaty’ and ‘juicy’ largely due to a major chunk of the population that is attracted by its snob appeal. "I have been able to garner more than 1,500 subscribers," says Kalra.

Even the circumspect are now figuring out options and are looking out for symbiotic relationships. The IDBI is chalking out modalities to work in a close coordination with the American Express. "The talks are in preliminary stage. We want to use their market and in turn would provide them with our resources. We’ve already started the negotiations with mutual ATM cards," explains P. Sridhar, Branch Manager, IDBI, Sector 8, Chandigarh.

The undercurrents of consumerism are stronger than the nose-diving economy. Organisations are pampering. Banks are willing to oblige, and credit cards are accepted in one lakh merchant establishments. In such a situation, the consumer is becoming the king. Or queen.

Purchasing on credit has its flop side as well. Chandigarh, including its satellite townships, has about 1.5 lakh card holders. The rate of default is colossal. A cardholder is blacklisted after he fails to pay up within seven months of taking credit. "Chandigarh is miles ahead of metros in non-payment of dues. People take money on credit and are unable to return," says Arminder Singh, investigator and reprocessor, who deals in lost transactions. "It is largely because some people want to maintain a high living standard, disproportionate to their sources of income and the banks are willing to oblige without cross-checking antecedents, because of the increasing competition," he adds. (See accompanying box). So nagging is the rate of default that key banks have joined hands to publish a Combined Card Recovery Bulletin which is updated every fortnight. The bulletin contains lists of all those cardholders who play truant. The April ‘98 visa card issue alone has a list of about 15 lakh such cardholders. Merchant establishments are required to verify from the bulletin about the authenticity of the card before they go ahead with punching a transaction. Further, Citibank and Bobcards have made it mandatory for shops and business establishments to consult them before honouring their respective cards if the purchase of a cardholder exceeds Rs 2,500 at a time.

Studies at the Department of Psychiatry, PGIMER, Chandigarh, have shown that speculative financial dealings are a psycho-social stresser. "After a while a person tends to suffer from depression, anxiety and other disorders due to bad debts," Dr A. Awasthy, Associate Professor, Department of Psychiatry, cautions.

There have been instances where persons who overspent later committed suicide as they could not repay the debts. Society abroad is taking a serious view of such financial implications. Janne O’Donnell says her 22-year-old son Sean Moyer hanged himself last year... just days after he told his mother he felt like a failure because of his bills. The Oklahoma University student had a dozen credit cards and more than $10,000 in debt. A plan to protect young adults from falling into credit card debt has passed the state Senate. The Bill would make it illegal for credit card companies to issue a card to anyone under 21 unless they have permission from their parents or can prove they are financially independent. The measure now goes to the House. The need of the hour is to implement such type of law in India too.

With a credit card in the wallet who cares about the future. Today’s earnings would wipe yesterday’s borrowing and tomorrow’s earning would rub off today’s debt. In this mad rush for materialism, every credit card company is looking for a niche in market. Marketing is going to be the key. Strategies are going to be crucial. Pampering services provided on a platter would take care of the rest. Sit back and watch. Bloodshedding among bankers for gaining access to the consumer’s money is on the cards.