HDFC Bank, SBI Card focus on cashbacks

MUMBAIA : Leading credit card companies HDFC Bank and SBI Card have sharply cut reward points in their premium offerings.

HDFC Bank has cut its reward points by 30-50% on its premium cards HDFC Infinia and HDFC Diners Black if they are used on the SmartBuy platform, according to a Macquarie Research report dated 2 February. The private bank was offering 5x reward points on Infinia and Diners Black credit cards, along with 5% cashback for all train ticket purchases done on IRCTC via the bank’s SmartBuy platform. The bank now offers 2.5x reward points on the same purchase effective February 1.

SBI Card, meanwhile, has reduced the reward rate for one of its core credit card offerings, SBI SimplySave, from 2.5% to 1.7%.

HDFC Bank claims that it aims to provide more offerings to compensate for the cut in reward points. “SmartBuy is a one-of-its-kind loyalty platform where HDFC Bank card holders have additional benefits (additional reward points/cash back) throughout the year. Based on early trends, we continue to see high traction in SmartBuy from premium customers and we plan to add more categories in SmartBuy to enhance our offering to the customers,” said an HDFC Bank spokesperson.

The revision in rewards points comes when banks have increased other offerings such as cashbacks on services. SBI Card said it has shifted focus from reward points to cashbacks. “We regularly monitor and change customer value proposition based on feedback and consumer behaviour. We have noticed that customer affinity towards instant benefits such as cashbacks is increasing. As part of this continuous benchmarking exercise, we have revised the reward point earning structure for our “Simply Save” product,” said Rama Mohan Rao Amara, managing director and chief executive officer, SBI Card.

Experts, however, believe that the revision aims to reduce cash outgo on credit cards. Banks such as HDFC Bank offer reward points and cashbacks on purchases made through SmartBuy and are moving to a Buy Now Pay Later model where they can earn money from interest on installations.

“Banks have developed a system that allows customers to redeem their reward points on credit card transactions instantly, leading to an increase in the redemption on the reward points. This is good for the customers, but is funded by banks entirely. Hence, a few banks have cut down on the reward points for a specific card segment,” said Sachin Vasudeva, associate director and head of credit cards, Paisabazaar.com.

The momentum of the credit card business has remained strong in December 2021, in terms of card issuance and spends, according to Reserve Bank of India (RBI) data. HDFC Bank remains the dominant force with a market share of 22.97%, followed by SBI at 19.09% and ICICI Bank at 17.92%.

HDFC Bank issued around 9.50 lakh credit cards in the third quarter, its highest ever credit card issuance in any quarter. This came after RBI lifted the ban on credit card issues in November. However, the bank saw a fee income growth of just 2% because of contraction in fees from payment products. The bank attributed this to more spends and lower revolver rates, lower utilization of credit limits, and the launch of cards with fee waiver features.

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