Banks are going into full power mode to make you use your credit card and make your first payment transaction, within one month of getting it. They are extensively communicating with customers and using lucrative early usage offers to get them to use their cards.
Banks Using Lucrative Offers To Make Customers Use Their Credit Cards
In August, within a few months after the release of new RBI norms, active credit card stats decreased by 22.6 lakh. RBI, to stop banks from forcing credit cards on those who don’t want them, had imposed a strict rule per which, the banks have to cancel the cards if users don’t use them soon enough after receiving them. Moreover, banks are now focusing on where the number of credit card activations is high. Also, where the cards are activated the banks are engaging more with the customers to sustain them and make them execute the first transaction within one month.
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“We have been issuing fee-based cards and, as a consequence, we have more engaged and active customers compared to issuers who predominantly issue lifetime free cards. Our 30 days spend active percentage has been at 50%-plus consistently”, by SBI Card, MD & CEO, Rama Mohan Rao Amara.
“Long-term, non-spending customers usually do not pay fees. In case a fee is levied, these customers either choose to start using the card after payment of fees or close it. According to RBI guidelines, the closing of 12-month-inactive customers will lead to volatility in card numbers across the industry in the short term and should stabilize in the next couple of months”, he added.
“It is activation and usage that drives profits. Weeding out unused cards is not a bad thing. However, there is the issue of sunk cost, which is why there is a lot of effort to get customers who are sitting on cards to get them activated”, said Sandeep Ghosh, Indian Head, of Visa.
“Visa has already provided many insights to banks on the best way to increase activation and regular usage. For banks, the sunk cost can be high. First, there is the cost of the card itself, which has gone up because of chip shortages and the need to incorporate an NFC feature in every card. Plus, there is the cost of secure delivery and handling. These cost the bank a couple of hundred rupees. It goes up further when there are added privileges like lounge access for which the bank will pay the card network (Visa, Mastercard, RuPay) a fee which includes the cost of these privileges,” as per him.
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“The cost of not activating a card within 30 days goes up significantly. So, our efforts to activate the card in the first month are intensifying. We are focusing more on channels where the activation rates are higher. Second, we are putting more effort into early engagement with customers. There will be some offers and incentives. We can also send communication and obtain explicit consent if the customer wants to retain the card”, said Sandeep Moghe, from Axis Bank, President and Head, of the Cards Department.
