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Co-branded Credit Cards

Posted in Finance Articles, Total Reads: 6920 , Published on July 07, 2011

Indians have always been attracted by freebies. So launching co branded credit cards in a country like ours is sure to be a good idea. Though such products were launched in other markets after it reached maturity, in India though the usage and uptake of credit cards is minimal the co branded cards have been a hit. Co branding is actually good for both the credit card companies as well as to the participating companies. Both get customers to spend on the basis of the getting something free or getting cash back on their expenditure.

cobranded credit cards

So what exactly is co branded cards? They are basically credit cards which associate themselves with firms like petroleum companies, airlines, retail outlets etc. They are normal credit cards which can be used like others but they offer benefits like travel points, discounts, cash back to customers. Co branding brings together 2 brands one being a bank and other the participating brand to enhance the usefulness and image of the product. Some of the examples of such co-branding include ICICI Big Bazaar Credit Card, Citibank Jet Airways Credit Card, SBI Railway Card.

So by co branding what do these companies get ? For the issuing banks the benefits are basically in terms of more visibility to the bank and to its credit card if the participating company is a big brand in itself. It would also result in increased spending by the customers for getting the freebies which the card offers. For the participating brand it would more sales as the customers are guaranteed of benefits by spending at the participating brand. This would promote more usage, loyalty towards the brand and also help in getting in fixed revenue from a dedicated set of consumers.

Then what do the customers benefit from these cards ? For the consumers cash back, free gifts, reward points to redeem are some of the freebies on offer. So it is a win win situation for the consumers as they are rewarded for spending. And for a country obsessed with saving and freebies this offering has struck a chord with all the credit card owning population of the country. So is this the way forward for the companies, maybe yes or maybe no. Indians by nature have always shied from spending more than what they have which is exactly opposite the western countries. So credit card which is a part and parcel of every westerner’s life will never become a mass product in our country.

But if we look at the Indian Market we see that most of the credit card issuing companies is operating at a loss with a lot of non recoveries. But on a question of whether it is worth it for the customers ? It could be yes. For a small population which uses the credit cards if you offer something for spending it is better to have it than the plain vanilla card. So the future in the credit cards segment would be co branding which is appealing for all the stakeholders involved. So to conclude co branding comes with extra benefits for the customer but at the sametime added responsibility to behave rationally and responsibly with the new found "spending" companion.

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