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After its incorporation as a new entity, AEBC in 2008, its core focus in the country – that of providing plastic money services to its Indian consumers – was back. “The Indian card market provides ample of opportunities to players like us; thanks to the huge untapped market with increasing consumers’ disposable incomes, buying habits et al,” explains Hennin. The consequent rise in consumer expenditure, growing affluence levels and consumer sophistication have all led to a robust growth in its credit card business. So far so good. But the question really is: does it make sense for AEBC to focus so much on its credit card business in India, while financial companies the world over are complaining that debt levels have risen? Surely, statistics prove so. As per the 2007-08 RBI Report, the total value of transactions made on credit cards during the year amounted to an incredible Rs.579.58 billion, an increase of 40.1% as compared to 2006-07. Moreover, the total number of credit card transactions too rose by a swashbuckling 34.6% y-o-y to touch an incredible 228.2 million during 2007-08. Now this compared to a poor 8.6% growth during 2006-07 is definitely good news for AEBC! As per N. Wadhwa, Director, SKI Capital, “The credit card market is growing at a healthy rate of 30-35%. The total card market today in terms of billings is growing at 30-35% p.a. and is estimated to reach over $20 billion this year. It definitely holds great promise for those who want to bet on it!” Also with just 2% of total consumer spending in the country being made via cards, the future looks anything but gloomy!
AEBC today caters to its consumers’ needs through cards like the Green and Gold Charge Cards, Green and Gold Credit Cards, Airline co-brand Cards, Corporate Charge Card, Platinum Charge and Credit Card. One unique strategy from this plastic money provider which helps it minimise defaults to negligible (as company officials claim) is that it only caters to a niche audience. Surely, this would not help it garner market share but it would give it the critical hedged position needed in a financial market where you deal with commodities (in this case credit) which never guarantee you immunity.
“In the current scenario, India presents unprecedented opportunities to Amex to further its strategy to own and serve the premium segment. Amex’s strategy to work with the premium segment fits in very well in the present Indian environment,” clarifies Amit Dutta, VP, Brand & Customer Engagement, American Express India. But as encouraging as the current situation sounds, the low income levels in the country makes work difficult for Hennin. “With others too targeting people from all possible segments, the competition only gets tougher for American Express,” explains A. Jainani, VP (Research), Khandwala Securities.
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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