Co-branded Credit Cards: An Emerging Financing Option This Festive Season

Co-branded credit cards come with various offers, incentives and discounts affiliated with retail merchants that provide them with an edge over other kinds of credit cards in terms of convenience to the customers.

This festive season, many banks are coming up with attractive offers on their co-branded credit cards. Notably, co-branded credit cards are the product of a mutual partnership between a particular merchant and a credit card issuer.

As per the recent trend, banks have been tying up with ecommerce websites, airlines and hotels to introduce co-branded credit cards. Fuel and airline credit cards are some of the most common co-branded credit cards where rewards points can be redeemed for air miles, flight awards, products and class upgrades.

Travel, food or shopping enthusiasts may find some of the best deals while making your transactions using a co-branded credit card, making expenses light on your pocket. Since co-branded credit cards are issued in association with trusted payment processing gateways like MasterCard or Visa, it is accepted across the globe. You can shop from any merchant’s outlet worldwide, subject to certain laws and guidelines.

Compared to a basic credit card, co-branded credit cards offer great offers and discounts as it is exclusively designed for this purpose.

Some co-branded credit cards do not levy finance charges on Equated Monthly Installment (EMI) transactions.

Many co-branded credit cards offer excellent discounts on dining and entertainment bills which means you save while you spend.

According to the RBI's provisional data for ATM, acceptance infrastructure and card statistics for the month of February 2023, the HDFC, SBI, ICICI and Axis Bank had a market share of 20.8 per cent, 19.8 per cent, 16.5 per cent and 11.7 per cent respectively in the credit card business.

The credit cards issued by HDFC, SBI, ICICI and Axis Bank were about 17.3 million, 16.5 million, 13.7 million and 9.7 million respectively.

HDFC Bank has partnered with Marriot Bonvoy, Swiggy, IRCTC Indian Oil and Tata Neu to offer co-branded credit cards.

SBI has also partnered with IRCTC, Air India, BPCL, PayTM, and Etihad to expand its business in the co-branded credit card segment.

Credit cards offer a buy now pay later feature(BNPL) also, which makes purchases easier. Buy now, pay later (BNPL) is a short-term installment loan that lets you pay for purchases over time with no interest.

"BNPL helps to attract the young population.  However, we believe this space is a bit riskier, we are watching this space carefully," said Narendra Dixit, Head-Retail Banking, CSB Bank. 

According to a report by Research and Markets, the BNPL market in India is projected to reach USD 25.387 billion by 2028, growing at a CAGR of 12.2 per cent during the forecast period.

"We expect good demand for Retail Loans, especially on Auto loans and Home Loans. Commercial Vehicles and Construction equipment are also showing good demand due to Infrastructure Developments in the country," Dixit added.

Since, the MSME sector is the backbone of India's economy. Some firms are offering rewards to their card holders for hyperlocal purchases.

"We care about communities and believe small businesses are at the core of every thriving neighborhood. Through ‘Offers Next Door’, we are trying to give backing to small businesses by encouraging and rewarding cardmembers to spend at local merchant outlets," said Anurag Gupta, Vice President and Head, Global Merchant and Network Services, American Express India.

Since the festive shopping season has begun, several e-retailers are offering customers the option to purchase goods online at zero cost-EMI- instead of paying for it now, you just pay for it over six months.

The no-cost EMI offers allow consumers to buy different products in installments without paying additional interest or charges.

This implies that you will be paying only the actual price of the product, just divided into EMIs.

“During this festive season, as online shopping surges, we are witnessing remarkable growth with a threefold increase in Gross Merchandise Value (GMV) financed. This can be attributed to the growing popularity of affordable and convenient EMI options and also due to the increase in first-time EMI shoppers," said Jatin Bhasin, Chief Product Officer, axio.

During the festive season, banks have also come up with interesting offers on loans. However, these offers are only available during the holiday season for a short period of time before returning to the standard interest rates.

Many banks are giving offers on loans and other financial goods as the festive season approaches.

"The demand for essential financial products such as home loans, personal loans, and auto loans reached record levels, reflecting the customers' enthusiasm during this celebratory season. We anticipate this festive momentum to continue throughout the current quarter," says Hemali Bhatt, Co-Founder, Switch My Loan.