Plastic flies higher than paper

Don't tell managers at American Express how to prepare for a business slowdown because the economy is in a slump. Or that the much-hyped con...

Don8217;t tell managers at American Express how to prepare for a business slowdown because the economy is in a slump. Or that the much-hyped consumer boom bubble for the exalted figure of 250 million middle class Indians has actually burst. The news is that the middle classes have helped the company launched yet another card which hopes to radically alter the face of the rapidly growing Rs 1200 crore plastic money market.

quot;When you talk of plastic money may I tell you that we are talking of a market that is growing at the rate of 15 per cent every year. And we have just scratched its surface,quot; says Sanjay Rishi, country manager, American Express that recently launched the highly-prized gold card for the Indian market. quot;There has been no reduced spending among Indians over the last one year8230;on the contrary, there has been a consistent growth in their spending nature. And please remember, we are in the charge card business where payments have to be made next month.quot;

According to Rishi, studies conducted bythe bank has shown a demand as high as 78 per cent among Indian cardholders for premium cards, primarily because of the special services and benefits offered by the bank 8211; even after the market having as many as six banks offering gold cards. quot;The Indian consumer wants a better definition of gold card which prompted us to launch the card,quot; adds Rishi.

Amex hops to rake in a significant amount of subscribers with the card that comes at an annual membership fee of Rs 3100 and has a powerful value package that is virtually unparalleled in the card market in India. With more than two and a half million existing cardholders, American Express has been registering a growth of nearly 45 per cent annually in the Indian market that also has major players like Citibank, ANZ Grindlays, Standard Chartered, Hong Kong Bank and a host of nationalised banks.

And the numbers are indeed daunting. Citibank, the market leader with more than 51 per cent share which includes the Diner series, has been registering a phenomenalgrowth of over 34 per cent annually, followed by the ANZ Grindlays that has been registering a growth of over 21 per cent and relatively newcomers like Standard Chartered and a host of Indian banks. Market analysts also attach tremendous significance to the recent tie-up between GE caps and State bank of India SBI, the country8217;s largest nationalised bank for launching credit card services.

quot;We have managed more than a 1,00,000 cardholders during the last couple of years we have been in business and currently service our cardholders through out network of over 23 brands and 50 ATMs across seven cities in the country,quot; says Vivek Kudva, manager card products division of Hong Kong Bank, which bagged the Euromoney Awards for excellence in 1997.

And along with the growth in the cards business is an increased growth in advantages offered by various banks. Interest free periods have increased, cash withdrawal limits hiked, round the clock services offered, insurance packages include even home cover andmembership reward programmes can guarantee a cardholder the best of times. quot;The concept of plastic money has undergone a complete change in the country. Today, there is intense competition among the banks for giving value additions to the customer. And with such increased services, the customer is bound to spend more. Its no longer the domain of the rich,quot; remarks Gautam Datta, a senior manager at Silicon Graphics India.

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Agrees Rishi, whose bank once proudly claimed in an ad campaign that the American Express card was Quite Frankly. Not For Everyone. quot;But today, the market has completely changed in India. Our research shows a wide spread in the consumer base and their spending habits. As a result, our base has also grown manifold.quot;

Market analysts feel the business is heavily tilted in the favour of the foreign banks whose aggressive marketing strategies and benefits outpace the Indian banks offering cards. Independent studies done by agencies like IMRB and ORG-Marg have shown a distinct lack of growth inthe credit cards division of Indian banks. quot;Indian banks may have a great network but that is primarily to handle the mainline banking business. Besides, most Indian banks initially offered charge cards and then slowly shifted to the credit card business,quot; says Abhijit Ghosh, public relations manager at the Central Bank which a year ago closed down its Centralcard business after suffering heavy losses.

But with increased business has come what many are describing the Asian continent as the defaulters syndrome. Almost all banks 8211; both multinationals as well as Indian 8211; have also drawn up huge debts in the process. So much so that the India Co-Operation Committee, an umbrella organisation of 23 banks in the country is working fast towards setting up the nation8217;s first Negative File System in the credit card industry.

Highly placed sources say that for the first time in the country, each bank would submit a list of defaulting customers that will be constantly updated to constitute the negative list. Allmajor international and Indian banks have become member of the special committee and agreed to share vital data that they always considered sacrosant.

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quot;In today8217;s world of technology and information exchange, a defaulter whose name appears on the list would find it difficult to approach any bank, financial institution, non banking financial company or other lending organisations to obtain any credit,quot; said a senior official of the newly formed committee. The official, who spoke on conditions of anonymity, said the list will be in operation by the end of the month.