upselling creding cards throug emi

Upselling Through Instant EMI On Credit Cards?

ReTechCon 2012

Rajeev Agrawalrajeev@innoviti.com

What Is EMI On Credit Cards?

• A facility retailers can provide their consumers to pay for their purchase in EMIs

• Helps merchant upsell and improve conversions

• Helps consumer manage cash flow

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Purchase month – Jun

July card statement

Aug card statement

Sep card statement

Normal transaction

Rs 3000 Rs 3000

3 months EMI transaction

Rs 3000 Rs 1000 Rs 1000 Rs 1000

Why Is It Needed?

Loan options for consumers Issues

Revolving outstanding on credit card

High interest rate – 2.99% per month

Personal loans from banks Not instant, paper work, high interestrate – 1.5% per month

EMI from specific banks Limits retailers choice of credit cards accepted for EMI

Consumer finance companies (Bajaj Finance)

Not available in all market segments, high interest rate – 14% per annum

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Consumers often postpone purchase due to lack of easy loansMerchants wish to pull in new customer segments

How Does It Work?

4

Store Till

All C

ard Issuers

Acquiring Bank

Rajesh swipes his SBI card for Rs 1000 on 6th

June at Vijay Mart

Vijay Mart gets Rs 1000 – bank

commission (e.g. 1.2%) on 7th

June

Rajesh pays Rs 1000 to SBI

(issuer) after 45 days

How Do Credit Cards Work?

Who Earns What?Case 1: Rajesh pays outstanding within due date

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Rajesh swipes his SBI card for Rs

1000 on 6th June

Rajesh pays Rs1000 to SBI on

21st July

SBI has provided a loan of Rs 1000 to Rajesh for 45 days at 1.2% interest earned from merchant

Party Earns PaysRajesh - Rs 1000Merchant Rs 988 -Bank Rs 12 -

Case 2: Rajesh pays minimum within duedate, balance outstanding next month

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Rajesh swipes his SBI card for Rs

1000 on 6th June

Rajesh pays Rs900 + INTEREST to

SBI on 21st

August

SBI has provided a loan of Rs 1000 to Rajesh for 45 days at 1.2% interest earned from merchant and Rs 900 for 30 days

at 3% interest per month earned from Rajesh

Party Earns PaysRajesh - Rs 1000 + Rs 27 Merchant Rs 988 -Bank Rs 39 -

Rajesh pays only Rs 100 to SBI on

21st July

How Do Credit Card Banks Make Money?

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From merchant

30%

Interest from

customer45%

Fee from customer

25%

Contribution

Customer Profile And Income Source

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• Transactor: Pays outstanding within due date

• Fence Sitter: Occasionally revolves outstanding

• Revolver: Often revolves outstanding

Type Customerfee

Customer interest

Merchant income

Transactor Yes No Yes

FenceSitter

Yes Yes Yes

Revolver Yes Yes Yes

Transactor is biggest consumer segment

for retailers and banks

Transactor Spending Profile

• 60% of card base in India are transactors

• 80% of credit limit on a transactorcard is unutilized

– Ex: Credit limit: Rs 2,00,000

– Transactor monthly spend < Rs 40,000

• EMI helps transactor increase spending in retail

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How Does EMI Work, Who Pays Interest?Case 1: Rajesh Pays For EMI interest

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Party Earns PaysRajesh - Rs 1030Merchant Rs 1000 -Bank Rs 30 -

6th Jun 21st July 21st Aug 21st SepRajesh buys for Rs 1000 on 3 months EMI @ 1% per month

Pays Rs 334 + Rs 30 (interest)

Pays Rs 333 Pays Rs 333

Merchant gets full amount, improving margins

How Does EMI Work?Case 2: Merchant Pays EMI Interest

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Party Earns PaysRajesh - Rs 1000Merchant Rs 970 -Bank Rs 30 -

6th Jun 21st July 21st Aug 21st SepRajesh buys for Rs 1000 on credit card on 3 months EMI @ 3%

Pays Rs 334 Pays Rs 333 Pays Rs 333

Merchant drives sales by bearing EMI charge

EMI Success Stories

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EMI Volume (Rs Cr) Across All Card Issuers

May 29, 2012 14

1100

2232

3400

5000

0

1000

2000

3000

4000

5000

6000

2010-11 2011-12 2012-13 Est 2013-14 Est

EMI Volume (Rs Cr) Across All Banks

EMI Segments

• Consumer durables

• Mobiles

• Fashion & accessories

• Jewellery

• Furniture

• Department store

• Travel & vacations

• Apparel

• IT products

• Watches

• Home furnishings

Virtually any category

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Typical EMI Share By Bank

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AXIS3%

Citibank13%

HDFC45%

HSBC2%

ICICI14%

Kotak1%

SBI15%

SCB7%

Average Bill Value – Pre and Post-EMI

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Typical increase in ABV due to EMI is 10-15%

-

5,000

10,000

15,000

20,000

25,000

30,000

Online shopping Mobile Jewellery

ABV Increase Due To EMI

Pre-EMI (ABV in Rs) Post-EMI (ABV in Rs)

Up-selling Pattern, Mobile Category

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0%

5%

10%

15%

20%

25%

30%

35%

40%

1000 to2999

3000 to6999

7000 to9999

10000to

14999

15000to

19999

20000to

29999

30000to

49999

Number of bills in each bill-range bucket

Pre-EMIPost-EMI

Pre-EMI: Jan-March 2011Post-EMI: Jan-March 2012

Like period analysis of bills in bands

Due to EMI customers movement seen to higher value goods, leading to upselling

Geography Analysis (70% EMI Volume)

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Bangalore, 19.50%

Delhi, 13.44%Mumbai, 13.38%

Chennai, 13.22%

Hyderabad, 10.25%

% Share Of EMI Volume By City (Top 70%)

Geography Analysis (Next 20% EMI Volume)

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Pune, 6.00%

Kolkata, 5.51%Ahmedabad, 3.48%

Surat, 0.91%Gurgaon, 0.90%

Jaipur, 0.65%

Coimbatore, 0.60%

Secunderabad, 0.57%

Guwahati, 0.56%

Lucknow, 0.41%

Cochin, 0.38%% Share Of EMI Volume By City (Next 20%)

Mobile Category: EMI Tenure Analysis

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-

5,000

10,000

15,000

20,000

25,000ABV (Rs) Mobile Category

12 Months

2%

18 Months

1% 3 Months

8%

6 Months

48%

9 Months

41%

EMI Tenure Preference: Mobile

CDIT Category: EMI Tenure Analysis

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-

5,000

10,000

15,000

20,000

25,000

3 Months 6 Months 9 Months

ABV (Rs) CDIT Category

3 Months

14%

6 Months

73%

9 Months

13%

EMI Tenure Preference: CDIT

Online Shopping: EMI Tenure Analysis

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-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

3 Months 6 Months

ABV (Rs) Online Shopping

3 Months

28%

6 Months

72%

EMI Tenure Preference: Online Shopping

Example: Sales & Margins Increase

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Sample Store No EMI With EMI Remarks

Card sales per month

Rs 2,00,000 Rs 2,30,000 15% increase

EMI sales Nil Rs 69,000 30% of all cardsales

Margins (5%) Rs 10,000 Rs 11,500

Bank charges(1.2%)

Rs 2,400 Rs 1,932

Margins net of bank charges

Rs 7,600 Rs 9,568 Over store margins improveby Rs 2000 ~ 1%

In Summary

• EMI on credit cards can help upsell by 10-15% and improve margins by up to 1%

• Typical conversion improvement on card sales is 30%

• Unlike other financing options, available to all merchants

• Available for purchase of any value

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Innoviti Multi-bank EMI Solutions

• Supports all Visa, MasterCard and AMEX cards

• Provides consumers instant, low-cost loan on their credit cards

• Loan (EMI) charges borne by merchant, consumer, OEM or bank

• Multi-channel - online, IVR, in-store and at-home

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BankCard base (in million) % Share Rank

HDFC 5.1 27% 1ICICI 3.8 20% 2SBI 2.5 13% 3Citibank 1.8 9% 4Standard Chartered 2.2 12% 5HSBC 1.8 9% 6AXIS 0.7 4% 7IndusInd (Deutsche Bank portfolio) 0.4 2% 8Kotak 0.3 2% 9AMEX 0.2 1% 10Others 0.4 2%

Total 19 100%EMI on 98% of India’s card base

Thank You

Rajeev Agrawal

rajeev@innoviti.com

Please visit our stall No. 9 to share with us your feedback

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