Are co-branded cards consumer convenience or clever marketing?

With more and more consumer brands vying for space in your wallet, what value do co-branded credit cards hold?

In the last year or so, the 8.56cm by 5.398cm card in your wallet has been the latest battleground for brands looking to establish themselves in the minds—and spending habits—of Indian consumers. While the credit card is ubiquitously used to tap and swipe to settle payments, a host of brands across consumer products, aggregator platforms and even Public Sector Undertakings (PSUs) are now introducing co-branded cards. The sell to a customer is this: the cardholder, upon regular spending, earns rewards. These might range from free room nights on the Marriott Bonvoy HDFC Credit Card to cashback offers on your Airtel bill (and other select spending) upon using the Airtel Axis Bank Credit Card. 

A card for every kind of purchase

Depending on what you prioritise, there’s bound to be a card for you. Want free flights? There’s the Club Vistara IDFC FIRST Credit Card or the Air India SBI Signature Credit Card. Do you order in food regularly? The Swiggy HDFC Bank Credit Card offers cashback on Swiggy, Instamart, Dineout and Genie orders, or else use the Eazydiner IndusInd Bank Credit Card. That card offers discounts on dining in or takeaway when using the app, among other benefits like a complimentary alcoholic beverage at select restaurants. For avid shoppers, Myntra, Amazon and Flipkart each have cards with incentives for purchases made on their respective platforms. Even the oil majors have gotten in on the action with BPCL, IndianOil and HPCL offering co-branded cards for those that drive long distances to work daily with a significant fuel spend. 

The choice is overwhelming but is it supported by numbers in the banking sector? Broadly speaking, maybe. India is adding new credit cards at a blistering pace, with 16.71 million cards issued in 2023 and 97.9 million cards outstanding overall at the end of 2023. For reference, as recently as March 2017, there were only 29 million credit cards in circulation. 

Value-adds galore 

For brands, the card is a way to build loyalty in a country where most consumers are still making fundamental choices—all incentivised with rewards. For example, Anurag Panganamamula, Vice President of Revenue and Growth at Swiggy says, “Enabling unparalleled convenience to consumers is at the heart of what we do at Swiggy. We recognise that modern-day consumers actively seek rewards, offers, and cashback programmes that add value to their spending. Keeping this in mind, we have launched an all-encompassing card in partnership with HDFC Bank and Mastercard that makes everyday shopping across a range of categories more rewarding and convenient.” The World Bank’s dataset from India from 2021 notes that while 77.5 per cent of people over the age of 15 have a bank account, only 27.8 per cent of the same group has a credit or debit card, which points toward a huge market waiting to be tapped. 

That is what drew the Marriott group to introduce their credit card in August 2023. At the launch event held at The St. Regis Mumbai, it was mentioned that the hospitality company and the brand have been working for three years to bring out the card, and it is the fourth co-branded card that the company is launching in Asia, and tenth globally. Khushnooma Kapadia, Vice President of Marketing, South Asia at Marriott International says, “It's a strong partnership. HDFC is a very, very premiere financial institution. And given the fact that our portfolio is also moving into a lot of tier-two, tier-three markets [across India], and we are penetrating into the hinterland, we really wanted to partner with an organisation that gives us that massive advantage in terms of reach.” 

More bang for your buck?  

However, even as the growth story of the Indian economy is frequently being plastered across the front pages of newspapers, Mihir Gandhi, Partner – Payments Transformation at PwC India says, “A lot of customers have two, three, four different kind of credit cards in their wallets and they are the ones that keep getting calls for credit cards. These are premium customers with CIBIL scores greater than 700 or 720. Banks typically try to offer them a credit card to get their business because they are good customers for the bank.” He says that banks are competing for the top tier of 30 million customers and each co-branded card is the chance to sweeten the deal to draw these high-spenders. So banks are hoping “to grow the size of the average transaction, growing that pie,” by incentivising spending.

With focussed offerings, customers gain cashback and rewards, while banks attract high-spending customers. While Gandhi does envision growth in the future, he cautions that it will not mimic the premium customers that banks are currently working to tap. Growth, however, is expected, with a recent Goldman Sachs report noting that 60 million people earn over US$10,000 annually (approximately ₹ 8 lakhs), a number that is anticipated to surge to 100 million people by 2027. PwC itself, in its latest Indian Payments Handbook 2023-2028, has predicted that the number of credit cards issued in the country will double in the next four years. 

It is easy to see why these cards have appeal. In the case of Marriott, the annual fee of ₹ 3,000 immediately propels a member into Bonvoy’s Silver Elite status, while with Swiggy, ₹ 500 is the annual fee, which only gives you a one-time, three-month Swiggy One membership. These incentives serve to build customer loyalty and Kapadia sets out some metrics of success for their card. She notes, “Cardholder engagement at our hotel is a very important barometer of success. We’re currently at about six million Bonvoy members in India, and our goal is to reach 10 million in the next two years.” While not all of that growth will be obtained from credit card sign-ups, the hope is that it will drive some of it.

Ronak Sheth, Chief Marketing Officer at wealth and asset management company 360 ONE sums it up, saying, “There is enough benefit for a consumer at large, where they are engaged with a specific brand or a platform.” However, at the top end, he warns of “card fatigue,” given the sheer proliferation of cards for every kind of expense. Another factor Sheth cites is that for first-time card users, the ability to rack up charges that are more than what one earns is a risk for banks. At the top end though, these cards incentivise spending and drive profits which are only expected to grow. No wonder then that some of the biggest consumer brands are now finding their way to your wallet, as they create incentives that propel customer loyalty, whether it be Tata NeuCoins or cashbacks. 

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