Upselling Creding Cards Throug EMI
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Transcript of Upselling Creding Cards Throug EMI
What Is EMI On Credit Cards?
• A facility retailers can provide their consumers to pay for their purchase in EMIs
• Helps merchant upsell and improve conversions
• Helps consumer manage cash flow
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Purchase month – Jun
July card statement
Aug card statement
Sep card statement
Normal transaction
Rs 3000 Rs 3000
3 months EMI transaction
Rs 3000 Rs 1000 Rs 1000 Rs 1000
Why Is It Needed?
Loan options for consumers Issues
Revolving outstanding on credit card
High interest rate – 2.99% per month
Personal loans from banks Not instant, paper work, high interestrate – 1.5% per month
EMI from specific banks Limits retailers choice of credit cards accepted for EMI
Consumer finance companies (Bajaj Finance)
Not available in all market segments, high interest rate – 14% per annum
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Consumers often postpone purchase due to lack of easy loansMerchants wish to pull in new customer segments
How Does It Work?
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Store Till
All C
ard Issuers
Acquiring Bank
Rajesh swipes his SBI card for Rs 1000 on 6th
June at Vijay Mart
Vijay Mart gets Rs 1000 – bank
commission (e.g. 1.2%) on 7th
June
Rajesh pays Rs 1000 to SBI
(issuer) after 45 days
How Do Credit Cards Work?
Who Earns What?Case 1: Rajesh pays outstanding within due date
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Rajesh swipes his SBI card for Rs
1000 on 6th June
Rajesh pays Rs1000 to SBI on
21st July
SBI has provided a loan of Rs 1000 to Rajesh for 45 days at 1.2% interest earned from merchant
Party Earns PaysRajesh - Rs 1000Merchant Rs 988 -Bank Rs 12 -
Case 2: Rajesh pays minimum within duedate, balance outstanding next month
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Rajesh swipes his SBI card for Rs
1000 on 6th June
Rajesh pays Rs900 + INTEREST to
SBI on 21st
August
SBI has provided a loan of Rs 1000 to Rajesh for 45 days at 1.2% interest earned from merchant and Rs 900 for 30 days
at 3% interest per month earned from Rajesh
Party Earns PaysRajesh - Rs 1000 + Rs 27 Merchant Rs 988 -Bank Rs 39 -
Rajesh pays only Rs 100 to SBI on
21st July
How Do Credit Card Banks Make Money?
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From merchant
30%
Interest from
customer45%
Fee from customer
25%
Contribution
Customer Profile And Income Source
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• Transactor: Pays outstanding within due date
• Fence Sitter: Occasionally revolves outstanding
• Revolver: Often revolves outstanding
Type Customerfee
Customer interest
Merchant income
Transactor Yes No Yes
FenceSitter
Yes Yes Yes
Revolver Yes Yes Yes
Transactor is biggest consumer segment
for retailers and banks
Transactor Spending Profile
• 60% of card base in India are transactors
• 80% of credit limit on a transactorcard is unutilized
– Ex: Credit limit: Rs 2,00,000
– Transactor monthly spend < Rs 40,000
• EMI helps transactor increase spending in retail
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How Does EMI Work, Who Pays Interest?Case 1: Rajesh Pays For EMI interest
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Party Earns PaysRajesh - Rs 1030Merchant Rs 1000 -Bank Rs 30 -
6th Jun 21st July 21st Aug 21st SepRajesh buys for Rs 1000 on 3 months EMI @ 1% per month
Pays Rs 334 + Rs 30 (interest)
Pays Rs 333 Pays Rs 333
Merchant gets full amount, improving margins
How Does EMI Work?Case 2: Merchant Pays EMI Interest
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Party Earns PaysRajesh - Rs 1000Merchant Rs 970 -Bank Rs 30 -
6th Jun 21st July 21st Aug 21st SepRajesh buys for Rs 1000 on credit card on 3 months EMI @ 3%
Pays Rs 334 Pays Rs 333 Pays Rs 333
Merchant drives sales by bearing EMI charge
EMI Success Stories
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EMI Volume (Rs Cr) Across All Card Issuers
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1100
2232
3400
5000
0
1000
2000
3000
4000
5000
6000
2010-11 2011-12 2012-13 Est 2013-14 Est
EMI Volume (Rs Cr) Across All Banks
EMI Segments
• Consumer durables
• Mobiles
• Fashion & accessories
• Jewellery
• Furniture
• Department store
• Travel & vacations
• Apparel
• IT products
• Watches
• Home furnishings
Virtually any category
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Typical EMI Share By Bank
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AXIS3%
Citibank13%
HDFC45%
HSBC2%
ICICI14%
Kotak1%
SBI15%
SCB7%
Average Bill Value – Pre and Post-EMI
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Typical increase in ABV due to EMI is 10-15%
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5,000
10,000
15,000
20,000
25,000
30,000
Online shopping Mobile Jewellery
ABV Increase Due To EMI
Pre-EMI (ABV in Rs) Post-EMI (ABV in Rs)
Up-selling Pattern, Mobile Category
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0%
5%
10%
15%
20%
25%
30%
35%
40%
1000 to2999
3000 to6999
7000 to9999
10000to
14999
15000to
19999
20000to
29999
30000to
49999
Number of bills in each bill-range bucket
Pre-EMIPost-EMI
Pre-EMI: Jan-March 2011Post-EMI: Jan-March 2012
Like period analysis of bills in bands
Due to EMI customers movement seen to higher value goods, leading to upselling
Geography Analysis (70% EMI Volume)
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Bangalore, 19.50%
Delhi, 13.44%Mumbai, 13.38%
Chennai, 13.22%
Hyderabad, 10.25%
% Share Of EMI Volume By City (Top 70%)
Geography Analysis (Next 20% EMI Volume)
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Pune, 6.00%
Kolkata, 5.51%Ahmedabad, 3.48%
Surat, 0.91%Gurgaon, 0.90%
Jaipur, 0.65%
Coimbatore, 0.60%
Secunderabad, 0.57%
Guwahati, 0.56%
Lucknow, 0.41%
Cochin, 0.38%% Share Of EMI Volume By City (Next 20%)
Mobile Category: EMI Tenure Analysis
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5,000
10,000
15,000
20,000
25,000ABV (Rs) Mobile Category
12 Months
2%
18 Months
1% 3 Months
8%
6 Months
48%
9 Months
41%
EMI Tenure Preference: Mobile
CDIT Category: EMI Tenure Analysis
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-
5,000
10,000
15,000
20,000
25,000
3 Months 6 Months 9 Months
ABV (Rs) CDIT Category
3 Months
14%
6 Months
73%
9 Months
13%
EMI Tenure Preference: CDIT
Online Shopping: EMI Tenure Analysis
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-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
3 Months 6 Months
ABV (Rs) Online Shopping
3 Months
28%
6 Months
72%
EMI Tenure Preference: Online Shopping
Example: Sales & Margins Increase
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Sample Store No EMI With EMI Remarks
Card sales per month
Rs 2,00,000 Rs 2,30,000 15% increase
EMI sales Nil Rs 69,000 30% of all cardsales
Margins (5%) Rs 10,000 Rs 11,500
Bank charges(1.2%)
Rs 2,400 Rs 1,932
Margins net of bank charges
Rs 7,600 Rs 9,568 Over store margins improveby Rs 2000 ~ 1%
In Summary
• EMI on credit cards can help upsell by 10-15% and improve margins by up to 1%
• Typical conversion improvement on card sales is 30%
• Unlike other financing options, available to all merchants
• Available for purchase of any value
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Innoviti Multi-bank EMI Solutions
• Supports all Visa, MasterCard and AMEX cards
• Provides consumers instant, low-cost loan on their credit cards
• Loan (EMI) charges borne by merchant, consumer, OEM or bank
• Multi-channel - online, IVR, in-store and at-home
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BankCard base (in million) % Share Rank
HDFC 5.1 27% 1ICICI 3.8 20% 2SBI 2.5 13% 3Citibank 1.8 9% 4Standard Chartered 2.2 12% 5HSBC 1.8 9% 6AXIS 0.7 4% 7IndusInd (Deutsche Bank portfolio) 0.4 2% 8Kotak 0.3 2% 9AMEX 0.2 1% 10Others 0.4 2%
Total 19 100%EMI on 98% of India’s card base
Thank You
Rajeev Agrawal
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