Authored by Vikas Chandak
The payments ecosystem in India has been undergoing rapid evolution, as digital economic systems – backed by concrete government initiatives – are increasingly being adopted across sectors in a phased manner.
Online banking, digital wallets, unified payments interface and cards – both credit and debit, have seen exponential growth with the increasing penetration of mobile phones and internet connectivity, especially in tier-2 and tier-3 markets.
As the push for a cashless, digital economy escalates, FinTech organizations have taken it upon themselves to disrupt – through intermediation or disintermediation – key elements in the well-established traditional credit card value chain.
Broad avenues currently being disrupted include:
Issuance and New Acquisition
With increased access to robust digital infrastructures, end-to-end digital sourcing – enabled by credit risk innovations and digital KYC, is disrupting the issuance of credit cards, along with other form factors like virtual and instant cards. Co-brand partners who have access to large swathes of user data can enable such issuances by providing valuable risk tolerance indicators and insights to bank partners.
Tech-savvy co-brand partners can associate with their bank partners to enhance member interest in bank co-brand products, while also providing personalized offers to joint customers. This symbiotic approach enabling disruption in issuance will benefit both, banks and the co-brand partners, provided both are willing to invest.
Activation and Usage
While FinTech companies have already made seamlessness and convenience their mantras when it comes to payments, there is ample room for co-brand partners to step in with innovations in rewards. This can take the shape of personalization using sound digital infrastructure or can enable near-instantaneous points earning, while also providing a smooth rewards & recognition journey. Discerning partners should go beyond and help banks drive micro-payments on their products by enabling a seamless transition between legal tender and the rewards currency.
The digital payments experience is expected to be as swift, as it is expected to be secure. FinTechs are perpetually striving to adeptly balance and ensure a mobile on-the-go experience by providing secure do-it-yourself (DIY) controls to users. This opens up doors of opportunity for co-brand partners as they can participate in enabling mobile experiences; in some cases, the co-brand partners can also be the interface for DIY controls depending on the bank partners’ willingness. Design & form innovations (virtual, metal, contactless, NFC, tokens, etc.) will also bode well for partners willing to co-invest in the right segments.
Co-brand partners have always played a vital role in acquiring new customers, activating & retaining existing customers and in driving higher usage for the credit card bank partners. Digital disruption, if adopted well, can accelerate the degree to which a co-brand partner is able to fulfill their role in issuance, activation, usage, and product experience. Such partnerships become indispensable to banks who look to grow their portfolio in the right segments and seek to leverage co-brand loyalties to consolidate the spending of valuable users.
Building this partnership requires additional investment and must go beyond just having a rewards & recognition value proposition from the co-brand partners. The co-brand partners need to amplify their technology integration efforts with banks, while also building their own infrastructure to support the bank partners. They can use Application Programming Interfaces or other systems to better integrate the rewards & recognition setup.
A two-way digital integration process can allow both partners to benefit immensely from member loyalties. Co-brand partners can enable digital sourcing, risk underwriting, identification, activation & DIY controls on their interface while providing banks the infrastructure to service the co-brand customer value proposition on the bank’s interfaces.
Organizations that step in this direction now are bound to make some early gains. They should, however, also be prepared for some false-starts. While there may be teething issues, we can say confidently and without a doubt that this is the direction co-brand cards need to take to stay relevant in a market where digital payments are becoming the norm and not the exception. Watch out for brands that initiate this, as this signifies their intent to be relevant to their customers’ evolving lifestyle & payment habits, and also showcases their intent to invest where and when needed.
Vikas Chandak is SVP & Head - Strategic Businesses, Financial Products, Partnerships & Alliances, InterMiles
First Published: IST