The Indian credit market is considered under-serviced and startups seem to now be trying to try their luck with launching their own credit cards in association with banks. Ola and Flipkart are reportedly the startups with plans to launch their credit cards soon, reports Economic Times. It becomes a win-win situation for both the companies and the banks. Startups will be able to gain an insight into the spending habits of its customers. The banks will suddenly find a large credit card customer base added to its kitty with little effort.
Ola is said to have a customer base of 150 million and expects to issue at least a million credit cards in collaboration with the State Bank of India in the first year itself. Flipkart’s banking partner could be Axis Bank or HDFC Bank.
For ecommerce companies like Flipkart, the distance to be travelled is minimal since they are already offering credit in some form to the purchasers on their platform either in the form of EMIs or other methods. The credit card will make it a little more organized. Ola too, has Ola Money and Ola Postpaid.
The larger objective, according to experts in the know is to get to know the type of purchasing behaviour or the buying habits of the customers using the database collected from the transactions using the credit cards.
Experts point out that the functions of the card issuance and management are divided between the company and the bank. The bank has to take care of risk analysis, card issuance, payment processing, credit line management and statement processing. An Ola or a Flipkart will then be responsible for marketing, promotions and discounts.
The other area where collaboration with the bank is envisaged is in the area of sharing the credit information the companies already have with the banks. Flipkart, for instance, is said to be tracking some 500 to 1000 points in their customers’ loan repayment history. This could prove to be very useful for the banks while processing the credit card applications. Flipkart’s rival Amazon already has a credit card offering with ICICI bank as its partner.