Mumbai, September 7 – AU Small Finance Bank, the sole small finance bank in the country offering credit cards, is poised to scale up its credit card portfolio significantly. MD and CEO, Sanjay Agarwal, recently shared his optimism about the bank’s ambitious plans, stating that they anticipate reaching a remarkable 10 lakh (1 million) outstanding credit cards by the end of the current financial year.
Agarwal emphasized the impressive growth rate of the bank’s credit card business, indicating a year-on-year (y-o-y) growth of 30 percent. Despite being in the early stages of this journey, the bank is on track to close the year with approximately 10 lakh credit cards, with plans to maintain a consistent growth rate of around 30 percent annually moving forward.
Presently, AU Small Finance Bank boasts around 6 lakh active credit cards, marked by an activation rate exceeding 90 percent. Customers holding these cards exhibit an average monthly spending of ₹20,000.
Sanjay Agarwal highlighted that the bank’s credit card expansion isn’t solely aimed at boosting its unsecured loan portfolio. Instead, the primary objective is to diversify the options available to depositors while nurturing long-term relationships with them. Credit cards, in this context, play a pivotal role in enhancing customer loyalty by retaining high-end customers and offering enhanced services to those progressing into higher income segments.
While the credit cards themselves are cross-sell products, the bank envisions that they will eventually open doors to cross-selling lending opportunities. However, Agarwal acknowledged that this transition will take some time, given that credit cards themselves represent a form of cross-selling.
In a significant development, AU Small Finance Bank has introduced its premium credit card, ‘Zenith Plus,’ which will be exclusively available to high-end existing salaried and business customers of the bank. Agarwal emphasized the need to dispel the perception that small finance banks don’t cater to High Net Worth Individuals (HNIs) or high-end customers. In reality, attracting such customers is essential for financial inclusion and funding priority segments. To do so, the bank needs to offer distinctive products that convey respect and exclusivity to these customers.
Agarwal explained that, despite the bank’s name indicating “small finance,” it necessitates deposits to serve its financial inclusion objectives effectively. Depositors expect the bank to provide top-notch products across all facets, from deposits and savings accounts to personal and business loans and digital applications. The bank’s credit card strategy aims to serve as an attractive proposition for depositors.
In addition to offering flexibility and personalization, credit cards are inherently secure due to their built-in features. Defaulting on credit card payments can adversely impact a customer’s credit score, making credit cards a preferred option for many. Agarwal underlined that credit cards are less risky compared to debit cards, which can expose bank accounts to fraud. He also revealed that the bank has observed no significant concerns regarding the quality of its credit card portfolio, with over 95 percent of cardholders making timely payments. The bank maintains a revolver rate of approximately 32-35 percent.
Regarding regulatory concerns surrounding the proliferation of unsecured loans in the industry, Agarwal stated that the growth in credit card spending should not be solely attributed to higher credit limits. Customers increasingly opt for credit cards due to the convenience, utility, and growing awareness of their benefits.
In conclusion, AU Small Finance Bank’s strategic focus on expanding its credit card portfolio reflects its commitment to serving a broader customer base while ensuring the highest product standards. This approach aligns with the bank’s objective of achieving financial inclusion and catering to a diverse clientele, including high-net-worth individuals and businesses.
