Case Study and Sample Slides India: Prepaid Card Market
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India Prepaid Card Market Client • The client is a consulting arm of leading payment gateway
Client Ask • The client mandated SGS to understand consumer prepaid card product landscape in India • The study was focused on key consumer prepaid card product categories: Open loop and closed loop. The categories further classified based on specific end-use (e.g. meal card, gift card, etc.)
Sutherland’s Solution • Identified consumer prepaid cards offered by the shortlisted issuers and drew a list • Categorized cards offered by each issuer into open loop and closed loop, and further classified them based on specific end-use (e.g. meal card, gift card, travel card, etc.) • Evaluated each consumer prepaid card under each category & sub-category based on their features & benefits, fees & charges and reach (acceptability of card across merchants and geographies) • Prepared a detailed excel rating model based on above-mentioned parameters and identified the most attractive card under each category; further evaluated customer acquisition strategies adopted by each of the shortlisted issuers • Prepared a MS PowerPoint presentation highlighting key findings of the study • The presentation also briefly covered broad market (demand-supply) trends and regulatory environment • Conduct three levels of quality checks: Self Review, Peer Review, Supervisor Review
• Benefits to the Client • Results/findings of the research study helped the client gain insights on the gaps in the consumer prepaid card offerings, and the relative performance of key consumer prepaid card issuers in India
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India Prepaid Card Market Summary India Prepaid Card Market Summary Parameter Cards in Circulation (mn) Number of Transactions (bn) Transaction Value (INR bn)
2005
2006
2007
2008
2009
CAGR (2005-2009)
Growth (2009)
2.0
2.5
3.2
4.0
4.9
24.8%
23.3%
22.0
30.5
39.8
51.2
65.5
31.4%
27.9%
2,167.8
2,720.1
3,474.0
4,339.0
5,324.1
25.2%
22.7%
Source: Euromonitor: Prepaid Cards India 2009 Report
Factors Impacting the Market • • • • • •
Prepaid card circulation increased at a compounded average growth (CAGR) of ~25% during 2005-2009 to reach 4.9 million cards in 2009. Approximately 38% of the adult population in India doesn’t have a bank account and hence are potential targets for prepaid cards Payroll cards dominate the prepaid card market in India with a 34% share, followed by travel card (24%), multi-purpose cards (22%), remittance card (14%), and other (6%) Payroll card market witnessed significant growth as Government and a number of private sector employers took efforts to push prepaid card as a channel for issuing payroll payments. Close to 1,000 companies in India are using Visa prepaid cards (reloadable) for payroll payments As the economy grew at over 8% during 2005-2009, an increasing number of Indians travelled abroad for business and leisure purposes. The convenience of prepaid card over cash became apparent and adoption increased. According to Axis Bank, their travel prepaid card customers loaded USD1 billion during April-May 2010 Remittance cards is another segment that has witnessed significant adoption. The fact that India is the largest recipient of remittances across the globe (having received USD52 billion in remittances in 2009) and has a large unbanked population worked in favor of this segment Intrex India with Itz Cash products is the first prepaid card player to enter the market in 2003. Intrex entered with Itz Cash card, a multipurpose prepaid card and subsequently gained popularity/adoption
Source: Euromonitor, VRL Financial News, * Business Standard, Sep 21,2010 Visa Survey on Prepaid Cards India.
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Prepaid Card Segments Rating Summary Personal Prepaid Card Segments - Overview Travel Card
Gift Card
# of Cards
12
9
# of Issuers
11
9
Bank VI
Bank VII
Bank VI Travel Card
Bank VII Gift Card
Personal Prepaid Card Segments - Overview
Bank VI
Bank V
Issuer Rated Best for Rates & Fees
Bank VIII
Bank VII
Issuer Rated Best for Rewards & Benefits
Bank VI
N.A.
Issuer Rated Best Best Card Issuer Rated Best for Features
Note: Best Issuers and Best Cards are identified based on the 5-point rating model that evaluates cards on Rates and Fees, Card Features and Rewards & Benefits offered
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Bank IX offers the best prepaid card products (only travel and gift cards sub-segments included) RANK
1
2
3
4
5
Bank I
Bank II
6
Bank III Bank IV Bank V
Bank VI
Bank VII
Bank VIII Bank IX
7
8
9
10
11
12
13
14
Bank X
Bank XI
Bank XII
Bank XIII
Bank XIV
Features
Rates & Fees
Rewards & Benefits
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Overall Ranking
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Key developments** in the India prepaid card market
First multi-purpose card (ITZCash Card) launched by Intrex India Axis Bank launches Visa Travel Currency prepaid card
2003
Oriental Bank of Commerce prepaid card launch
Corp Bank remit card launch
HDFC Bank gift card launch
SBI Yatra travel card launch
Kotak Mahindra gift card launch
2004
2005
ICICI Bank food card launch
2006
SBI VISA mobile Check option added
ICICI Bank reimbursement card launch
ITZ noQ utilities card launch
IOC fleet card for transporters launch
Intrex India: Claims 2.5 million active card users
RBI allows FOREX purchase via prepaid, debit, credit card
PIF India launch
RBI regulates prepaid card issuance
2007
Citi-Reliance Money Travel Card launch
2008
Yes Bank-JPM travel card launch Union Bank gift, payroll card launch CBDT* to monitor NBFC card transactions
2009
Rev Asia Pacific, Central Bank & MasterCard launch prepaid card ENS survey: Indians prefer cash while traveling
Axis Bank travel card customers load USD1 bn during AprilMay 2010 alone Karnataka Bank launches Student Card
2010
PNB launches Travel Card Karur Vyasa VISA travel card launch Collaboration of ECS, 3rd party S/W provider with MasterCard
MasterCard survey: Indians wary of plastic card
HDFC EMV prepaid card launch
RBI to allow prepaid limit up to INR50,000
Andhra Bank, BoI & Barclays plan entry
Source: Economic Times, The Hindu, Business Standard *CBDT: Central Board of Direct Taxes **Please note the developments covered in this slide are not exhaustive .
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Prepaid Card Trends Key Trends Credit-averse nature of Indians: A big plus for prepaid cards •
Indians typically prefer to avoid debt. Since prepaid cards were introduced in 2003, adoption rates have been quite high, which resulted in prepaid cards reaching over 4.9 million cards in circulation in 2009
•
Unlike credit cards, prepaid cards do not have any element of debt accumulation, which helped these cards grow in India during the initial period, particularly in the aftermath of the global financial crisis when debt was diligently avoided Many parents preferred prepaid cards for their children to provide their children with the convenience of financial cards while enabling parents to control their spending
•
Organizations now require RBI approval to introduce prepaid cards •
Rapid growth in prepaid cards caught the attention of the Reserve Bank of India (RBI), who decided that the segment had reached an adequate size to be regulated and hence introduced the Payment and Settlement Act in April 2009
• •
According to this legislation, organizations wishing to issue prepaid cards need authorization from the Reserve Bank of India Banks are allowed to issue open prepaid cards that can be used for cash withdrawals, while non-bank financial companies are only allowed to issue what the RBI refers to as semiclosed prepaid cards, which do not permit cash withdrawals but can be used for such transactions as utility payments. Examples of these include Itz Cash Card, Done Card and I Cash
Travel and remittances emerging as new segments to drive prepaid card adoption •
With more Indians traveling overseas and within India; travel prepaid cards have emerged as an easy and popular means of payment
•
According to IRCTC (Indian Railway Catering and Tourism Corporation), a subsidiary of Indian Railways that handles online ticketing operations, almost 30% of its online transactions are via prepaid cards. As per Visa's International prepaid products' Regional Director, Neel Nilakantan, over 40% of business travelers in India are using prepaid cards to pay for business expenses Another big opportunity for prepaid cards lies in the remittance segment, where non-resident Indians (NRIs) can load money onto the prepaid cards for use by their relatives and friends back home
• •
India’s second largest bank, ICICI Bank, launched the Money2India Remittance card to provide an easy means for consumers to receive remittances from NRIs. These cards are available at a value of INR 400 with a validity period of 10 years and offer attractive currency exchange rates
Source: Euromonitor, Business Standard, Sep 21, 2010 Visa Survey on Prepaid Cards India
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Prepaid Card Market Competitive Landscape Market Share of Key Players based on Prepaid Cards in Circulation (2008)
10.6% 32.6%
9.4% 8.6%
100%
Total
7.7%
Intrex India
Citigroup Inc
ICICI Bank Ltd HDFC Bank Ltd
6.7%
Axis Bank
6.3%
IDBI Bank Ltd
4.3%
13.9%
State Bank of India
Others
•
Itz Cash Card by Intrex India, launched in 2003, is India’s first prepaid cash card. Itz Cash cards can be purchased at approximately 100,000 locations across India and are accepted at over 3,000 merchants
•
Other non-banking financial companies (NBFCs) in the pre-paid cards market include Done Card and I Cash cards. These players, which made an entry after Itz Cash, have only small presence as they are focused on select regions. They are primarily emerging in the western region of the country
•
Remittance prepaid cards segment is dominated by large private and public banks, including ICICI Bank and SBI
•
Foreign travel cards is another segment that is dominated by banks. ICICI, SBI and Citibank are among the large banks having strong offerings in this segment
•
Gift cards is yet another segment where most banks are working towards establishing a strong foothold
Source: Secondary Research
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Prepaid Cards by Issuers Number of Prepaid Cards Issued By Sub-segment and Issuer
Number of Prepaid Cards Issued By Sub-segment and Issuer
Banks
Open-loop Travel
Gift
Annuity
Remittance
General Purpose
Utilities
Axis Bank
1
1
1
1
Central Bank of India
1
1
Citibank India
1
Corporation Bank
1
HDFC Bank
2
1
ICICI Bank
1
1
Intrex India
1
1
Oxigen Services
1
GI Technology Pvt. Ltd.
1
Done Card Utility Limited
1
IDBI Bank
Student
1
1
Karnataka Bank Karur Vysya Bank
1 1
Kotak Mahindra Bank Punjab National Bank
1
State Bank of India
1
Standard Chartered
1
Yes Bank
Source: Sutherland Prepaid Card Database
1 1
Union Bank of India
Non-Banks
Closed-loop
1
1 1
Majority of the prepaid cards issued by issuers offer either travel or gift cards
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Travel Cards: Features (by Issuer)
Number of Cards
Bank I
Bank II
Bank III
Bank IV
Bank V
1
1
1
1
2
Features # of Currencies Available
9
1
3
1
3–9
Replacement Card Provided with New Account
SMS Alert after Every Transaction
Bank VI Number of Cards
1
Bank VII
Bank VIII
Bank IX
Bank X
Bank XI
1
1
1
1
1 Features
# of Currencies Available
6
3
3
3
3
1
Replacement Card Provided with New Account
SMS Alert after Every Transaction
Most Attractive
Least Attractive
Source: Bank Website, Primary Research
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Thank You
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