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practice a better financial control Project Report
Compiled by: Miss. Samata.S.Rembalkar College: T.Y.BMS ST. ANDREWS COLLEGE St. Dominic Road Bandra (West) Mumbai-50
I Miss.Samata. S. Rembalkar of St. Andrews College, St.Dominic road, Bandra (West), hereby declare that I have completed this project on The Card Industry in the academic year 2004-2005 . The information submitted is true original to the Best My knowledge.
CERTIFICATE
I Mr. Professor Raj , hereby certify that Samata. S. Rembalkar of St.Andrews college, Bandra (West), has completed the project on The Card Industry in the academic year 2004-2005. The information submitted is true and original to the best of my knowledge.
I would like to acknowledge Mrs.Prerna Mathur, Assistant Vice President, CitiBank N.A for her expert guidance and also professor Raj on the report and for providing inspiration, encouragement and assistance in this endeavor. I also wish to thank the entire faculty of BMS, St.Andrews particularly Mr. Stephen Dsilva for the guidance and creating a stimulating and supportive work environment.
Pg.No
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List of Illustrations:
Individual player positioned 1) EDC terminal cost 2) Estimate based on NCAER study 3) Survey conducted by org marg and business today 4) Reason for purchase of credit card 5) Information source about credit card 6) Customer segment 7) Credit card Indices 8) Competitors Charges 9) Market size of various players 10) Card purchase process Designed 11) Comparative survey of different cards technology 12) Uses of smart card in todays world 13) Industry Update 76 47 40 44 38 34 35
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"Credit Cards are going to emerge as the best form of consumer lending with regard to growth rate and profitability". Reuters The slogan of the Citibank The Citi Neversleeps conveys the idea of the bank always being present to service the customer. "The role of credit cards is know known to the cardholders and is increasingly emerging as an alternative to hire-purchase or loan on consumer goods". The Economic Times "Credit Cards a r e the most versatile f o r m of Retail Lending". Business India "The domestic market can see both the hare and the tortoise compete and can both win the race. There is room for everybody in Credit Cards". The Times of India The Customer is the King. One of the most effective marketing strategies t o promote the Plastic culture in India has been to load the credit card with a host of attractive benefits. Business World Reflection: Spending money one doesnt have is like living the years yet to come" Everyday we hear environmentalists yelling at top of their lungs "Say No to Plastic". It certainly doesn't seem to affect one industry; the card industry. An appetite for cards does exist as people are increasingly experiencing the cash-free culture. The proliferation of cards has made the process of choosing rather difficult
To Study the Credit Card Industry in terms of its characteristics, factors affecting the market and trends visible in the market and future prospects
"Strategies to enable a new entrant, to capitalize the opportunity prevailing in the market, establish itself and gain a market share"
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TYPES OF CARDS:
With the advent of the MNCs and liberalization of the economy, the Indian Consumer is flooded with a variety of choices. The financial services industry is no exception. Credit card Credit cards are plastic cards with scannable magnetic strips issued by a bank or a business, which allow the cardholder to purchase goods or services on credit. They are also sometimes called charge cards, though this term usually refers to cards issued by a retailer for use in that retailers stores only. Common credit cards include Visa, MasterCard, American Express, Discover, and Diners Club. In recent years, most banks have begun offering their customers Debit Cards, which bear a MasterCard or Visa logo and are processed like those cards but which withdraw funds directly from the cardholders checking account rather than extending credit to the cardholder
Charge Card It's similar to a Credit Card, except that on the due date for payment, you have to pay the whole outstanding amount. You can't part settle the amount and pay the rest later. A charge card is one where the purchases made out on the card are to be fully paid for at the
end of every cycle normally 30 days. There is no provision to carry over the payment. Diners and American Express are significant examples of this type of card. These cards are for convenience and not credit. Charge cards were first product to be offered by Card companies across the world. Charge cards are a1so called trave1and entertainment cards.
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In-Store Cards These are very popular in the US where retail chains offer credit cards to shop in their stores across the country. They were the first to offer this facility at the turn of the century. Some of the popular in store cards, which have also become a credit card, are Harrods card, Macys card, and Safeway and Wal-Mart card. Banks but even NBFCs usually issue cards like TATA Finance may issue them. But however all cards have to belong to an Acquirer organization. American Express is the only exception where it is the issuer as well as an acquirer.The following will explain the above terms. Issuing organization Has approximately 40 co-branded cards including Times cards, Citibank Maruti Card and Army, Air force and Navy Card. The issuer as it is commonly known is the organization that markets and se11s the card to the customer. The issuers also maintain the account of the customer and provide credit or debit facilities and bears the transaction and credit risk. Bank Cards - are issued by MasterCard and Visa member banks.
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Business Locations: The US, Latin American countries, Canada, Europe, Japan, Korea, Taiwan & Australia 95% of all their card payments are from 20 countries They have 14 million establishments worldwide to their credit Their Strategy is: Centralized decision making Their Staff is Dedicated to serving big issuers globally They have 18 Member Banks in India They have a Present Card Base of 1.7 million in India Their Brand Recognition Increased with 'Priceless" Ad campaign The general perception however is that MasterCard products are superior to Visa, though Visa is the leader Their Focus is to make Payment business more successful for members and merchants & life simpler for customer Their Future Plans include establishing 'Multose'-a debit, credit & store value card all in one American Express Headquarters are in New York Business Locations: Spread in 75 offices in 56 cities across 38 countries Major operations: The US, India, China, Germany, Taiwan, Greece and the UK They dominates the Travel & Entertainment (T & E) Market
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Visa International Headquarters: San Francisco Business Locations: 200 countries It was founded in 1976 They have 16 million establishments worldwide They have already issued over 600 million cards. 50% (volume) of all card charges are Affinity/co-Branded Cards Their promotions include Sweepstakes, Charitable Programmes & Event & Sports Marketing Increase ME base to 250,000 by turn of the Century They have 23 member Banks in India They have a present Card Base of 1.2 million in India They have a Brand Recognition for World's #1 payment system Their focus is on Infrastructure development.
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Their inflow depends on franchise fees charges to the issuer and acquirer They invest their surplus in developing new products or technology They act as enablers and catalysts for issuers in new markets. They provide Marketing support to the issuers They also provide uniform compliance and code of conduct for their regulations.
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How are individual players positioned in the credit card space in India? Both Citi and ICICI Bank claim to be number one with a card base of over 2 million. State Bank of India has a card base of
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Aggressive Players
Customer Base
Affinity Cards
Eight ------------------------29
The aggressive players are adopting a two-pronged approach: increasing the customer base and treading new zones by expanding the coverage area beyond metros and big towns. ICICI Bank has taken its product to 67 cities, SBI Cards is present in over 40 cities and HDFC Bank plans to cover 25 cities soon. Among the foreign banks, Standard Chartered is present in 18 cities and Citibank, 30 cities. Another strategy is to launch more and more co-branded cards. For instance, ICICI Bank has six co-branded cards and eight affinity cards. HDFC Bank and SBI Cards have two co-branded cards each and Citibank has 29 co-branded and affinity cards. Public sector oil companies, mobile telephone players, retail chains and even airlines are joining hands with banks to float co-branded cards. Despite this, the total card spend is only around Rs 12,000 crore (Rs 120 billion). On an average, a credit card holder spends between Rs 1,500 and Rs 2,000 on a card in one month. (On this issue
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24 EDC terminals
HDFC Bank
ICICI Bank
Citibank
An imported EDC terminal costs between Rs 18,000 and Rs 25,000, depending on the bulk of the order. The cost has come down from Rs 32,000 over the past year because banks are aggressively placing orders for them. However, the Hyderabad-based Linkwell Telesystems has recently started manufacturing these terminals and brought down the cost to less than Rs 10,000. This will help increase the number of terminals manifold. The banks can now afford to put up EDC terminals even in provision stores as the break-even point for these terminals has come down to less than Rs 50,000 worth of transactions a day from Rs 100,000. The convergence in the telecom sector, with greater use of mobile telephones and the Internet, will bring down the transaction cost further. Some players have already tied up with CDMA operators and replaced the landlines of EDC terminals to bring down processing costs. The government too can do its bit by waiving the tax on credit cards -- a big disincentive for card users. Currently, an 8 per cent service tax is imposed on credit card transactions. Some countries in Asia-Pacific actually offer tax incentives to encourage credit card use. This is to bring down cash transactions and bring in at least a part of the parallel economy into the mainstream economy. Once the volume of business transacted through credit cards grows and consumers start rolling over a higher percentage of credit instead of clearing the bill instantly, banks will be in a position to cut interest rates on credit cards, provided NPA levels are kept low.
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Active e cards in April 1999: - The 1994 estimates of the market predicted a total of 10 million cards by 2000. But the actual are lower. However the estimate about computerized bank branches and the number of ATM's is almost on target. A survey of the Credit Card Management Consultancy (CCMC) of l0, 000 people who hold either credit or charge cards in 15 cities across India reveals the following facts: 16 %considered ATM connectivity to be of value 78 %were unaware of the difference between a charge card and a credit card.
67 % were unaware of the financial loss to be borne if they lost the card and that they would have to bear all expenses incurred on the card until the loss is reported 70 % were unaware of the action to pursue in case of loss of the card. 8 4 % believe they are entit1ed to 30 days of free credit or more in all situations. In reality this is applicable only in those cases where monthly bills are settled in full.
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According to a survey conducted by Org Marg and Business Today, The features that are considered most important in the case of credit cards in India are convenience, acceptability, credit limit and the quality of service in that order. Other features that are considered important are also given in following table. Table: What features are most important? Factor Convenience and acceptability Cash Advance and Credit Limit Quality of Service
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Importance 66 % 58 % 52 %
At the same time the important reasons for purchase of a credit card are travel & entertainment followed by cash advance. (Details in Table given below) Table: Reason for Purchase of credit card Reason Travel and Entertainment Cash Advance/ Credit Limit Credit Period Emergency Services Importance 56 % 49 % 38 % 25 %
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The various occasions where cards are used in India naturally flow from the reasons for Purchase of cards. Still the majority of card spending was on Travel, Hotels and Restaurants. Other occasions of credit card use a) Travel - Hotel, Tickets, etc. b) Restaurants c) ATM Cash d) Clothes Store e) Provisions Store f) Consumer Durable - TV, Refrigerator, etc. g) Petrol Pump. h) Others As has been mentioned earlier the Very Rich credit card holders have at an average 3.4 credit card each. The reasons cited for multiple cards are Wider acceptability, say by having Master, Visa and Amex cards. Increasing the credit limit. Flexibility in making payments - using the card with the higher credit limit, with highest time to billing date and often a different card for different occasions (e.g. unlimited credit Gourmet card for the bigger hotel and travel bills). Maintaining different cards for personal and official purposes. Nationalized bank cards were found to be attractive in their local regions, e.g. Bank of Maharashtra card in Pune, as the MEs are more receptive to these owing to faster recoveries. Nationalized bank cards were maintained as their billing recovery was erratic, resulting in enhanced credit periods for the holder. Most people claimed to have no fixed criteria to decide which card would be used for a Particular purchase. Lastly the existence of multiple card holding among consumers
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The above analysis has been based upon the surveys conducted by Business Today Org Marg and Credit Card Management Consultancy.
Customer Analysis
a) Customer Segments: The segmentation of the card industry can be done on the basis of income. The Indian market reflects considerable diversities in income levels and lifestyles. A World Bank estimate places average annual household incomes (in terms of purchasing power) at US $6452. But there are large segments of people, whose income levels are significantly higher, growing faster and spurring a consumer revolution. It is difficult to obtain correct estimates of this group, as there is a very small percentage of Indias rich who pay income tax and their income levels are correctly reported. Therefore to conduct this segmentation, we have made use of National Council of Applied Economic Research
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The segment which have been identified are as follows: Segment Very Rich Consuming Class Climbers Aspirants Destitute Income Group (Rs.) 2,15,000+ 45,000 2,15,000 22,000 45,000 16,000 22,000 < 16,000
According to the report: The Very Rich (annual income over Rs 215,000) will increase form 1 million to 6.2 million households by 2006-7. The Consuming Class (annual income of Rs 45,000-215,000) will grow from 28.6 million to 90.9 million households by 2006-7. The number of households in the Aspirants (Rs 16,000-22,000/year) and Destitute (less than Rs 16,000/year) groups will decrease significantly. The opening up of the economy coupled with the entry of the MNCs, the income levels of the middle class has gone up significantly. The figure below illustrates the same. It is important to note the increase in consuming class, and the following decrease in destitute.
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14 0 12 0 10 0 80 60 40 20 0
cl as s s as pi ra nt s ric h cl im be r itu te
million household
1997-98 2006-07
ve ry
Segments
co ns um in g
Very Rich
this segment. Each holder has at an average 3.4 credit cards. Few Credit card holders. Holds maximum
Consuming Class
potential, as there is distinct change in consumption habits of this segment in the past few years.
Climbers
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de st
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Index of Literacy: Justification: Literacy, irrespective of levels/ grade creates an awareness of the financial services available and the urge to use them. Calculation: Ratio of States % of literate population as the numerator and the nations percentage of the literate population as a denominator.
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COMPETITORS ANALYSIS
a) Competitor Identification
The table below gives an indication of the various value-added services on offer from various banks.
Citibank
Stanchart
HSBC
Amex
-------
------
-------
Yes
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------------
----------
Yes*
-------
Yes (G)
------------
-----------
--------------
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-----300 250
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Citibank
High
Average
All
Very good
Very good
Average
Good
HSBC
Average
Poor
All
Poor
Average
High
Poor
Stanchart
Above Average
High
All
Average
Good
Average
Average
Average
Average
All
Very Good
Average
Low
Average
Above Average
Average
All
Average
Very good
Average
Poor
SBI
Above
Average
All
Above Avg.
Very good
Low
Average
Diners
Low
Poor
High
Average
Average
High
Good
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b) Strategic groups
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c) Major Competitors
B ank of In d ia 6%
stanshart citibank Bank of B aroda
Stanchart Bank has the second largest card base of 4.5 lacs CIF. It was the pioneer in launching photocards in the country, and in developing systems to track defaulters. The bank offers three types of cards - Classic, Executive, and Gold in the lower, middle and premium segments respectively. It is the only ISO certified credit card in Asia.
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Indian Oil and Citibank have announced the launch of India's first co-branded debit card. The debit card will be available to both existing and new Citibank Suvidha and banking customers.
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ICICI Bank announced the launch of drivesmart a credit card package for the fleet owners running goods and passenger transport vehicles, reports The Financial Express. At present, drivesmart services are available at more than 35 outlets on the MumbaiAhmedabad highway. ICICI Bank has tied up with Hindustan Petroleum Corporation petrol pumps for enabling payments for fuel and food through the card. The bank is in talks with other petrol pumps to increase its reach, said ICICI Banks executive director, Chanda Kochhar. The Financial Express. CITIBANK Launches Prepaid Dollar Card. Citibank kicked off its World money card in India on 15 Nov in India .It will issue prepaid cards for amounts ranging from $500 to $10000, subject to Reserve Bank of India norms. Apart from withdrawals of cash from eight lakhs Visa ATMs, Citibank world money enables the customer to purchase goods and service by swiping the card at POS. The Business Age ABN Amro are trying to address the fears of the debt-averse Indian by introducing new concepts, which allows a user to fix spending limits. Also, banks are bringing down the interest rate on credit to around 1.75% from the 3-4% charged a year ago. www.money.com. IDBI Bank has taken over the retail portfolio of merchant acquiring business from French bank BNP Paribas, as part of efforts to foray into the credit card business in a big way, reports PTI. With the deal, IDBI Bank has acquired a live portfolio of 2,500 merchants across the country and a foray into the Rs 10,000 crore (Rs 100 billion) merchant acquiring business . The bank now plans to issue a Visa Electron debit card to over 6,40,000 customers and also intends to open offices in two more towns. . www.money.com. Tata Finance Ltd (TFL) has launched India's first credit card Portal. Tata Finance credit cards are embarking on an ambitious Internet initiative that will integrate various parts of its operations. The financial Express A BANK puts up ATMs to serve its customers better, right? Not necessarily. Sometimes banks also put up ATMs to get more customers.
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recommen Mailing,
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The supplier may prefer payment by credit card because there is no cash-handling problem, payment on va1id vouchers is guaranteed and the sales vouchers provide a full record of each individual transaction.
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Profiles Of credit Cardholders A cardholder profile is an outline of the cardholder's background in terms of education, income, residence, family and ages. It also includes frequency of card usage, types of purchases made by the cardholder and the number of cards a cardholder possesses.
Who uses credit cards? The determinants of card use are: (a) Income: -credit card usage was found to be positively correlated to high income. Moreover, luxury goods can be purchased by credit cards, which are more likely to be bought by those with higher incomes.
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(c) Age of family head and family life cycle: - families that are in an age range that typically makes many expenditures, especially families with children are more likely to use credit cards than any other group. Also credit card usage is expected to be more where the family head is in middle age and in a managerial position. Double income fami1ies are another target segment.
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FORMS OF PROMOTION
1) Advertising: A number of advertising guidelines have been developed. They are summarized as follows: Intangibility and concreteness Inseparability/ perishability and reputation Heterogeneity and documentation Characterization as a sequence of events
2) Personal selling: Personal selling offers immense benefits for the marketing of credit cards and contribute to a range of objectives, for example:
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Advantages Of Smart Cards Proven to be more reliable than the magnetic stripe card. Can store up to 100 or more times the information than the magnetic stripe card. Reduces tampering and counterfeiting through high security mechanisms. Can be disposable or reusable. Has wide range of allocations (e.g., banking, transportation, and healthcare...) Compatible with portable electronics (e.g., PCs, telephones... ). Applies rapidly evolving semi-conductor technology, i.e. it requires smart card reader hardware. Comparative survey of different card technologies Failure Rate Technology Maintenance costs No. of Intervention No. of Failure p.m No. of machines maintained by one technician Cost of spare parts 400 500 100 400 1000 20 400 800 15 100 100 100 2% Magnetic N/A Optical 0.03% Smart
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In the United States, Oklahoma City has smart card system called MediCard since 1994. Smart card readers are installed at hospitals, pharmacies, and ambulance service, physicians offices and with the fire department, allowing the MediCard to be used in both ordinary and emergency circumstances. Making Payphone Convenient The response to the lack of security and high costs of the public phone system France Telecom implemented the prepaid smart phone card in the early 1980s. The smart card is purchased in various denominations. When inserted in the telephone, the cost of the phone call is displayed and deducted from the total balance remaining on the smart card Prospective Companies Teleservices Ltd. (TTL) has established the country's first smart card payphone service network in Andhra Pradesh based on Schlumberger's state-of-the- art smart card technology. In Bombay, the MTNL virtual phone card is not a smart card, but a personal identification phone number; i.e. there is no physical card. SIM cards, which provide subscriber identification through top-level PIN code verification and active second-level identification using sophisticated encryption algorithms before granting access to the network, are a rapid growth area. Based on its expertise, Frost and Sullivan estimates the current market in India at around 1.3 million cards, predominantly as SIM cards. Currently about 80 countries throughout the world use smart cards in payphones. The world market for smart phone cards is expected to be well over 1 billion cards in the year 2000. Installations of smart card- based payphones are expected to quadruple by the end of the century. Phone cards are also used as an advertising tool and as a collector's item, just like stamps. Before The Smart card With the smart card
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The same benefits can be found that in many other applications where coin- operated machines have suffered from the increased costs and 1oss of service from vandalism, coin collection, and low reliability. Smart cards are already being used at: Toll booths Parking lots Gas stations Vending machines Arcade games, etc. Securing Mobile Telephones
The GSM radiotelephone system (Global System f or Mobile Communication), which originated in Europe, uses a smart The facility allows each national operator to keep control of security and payment aspects, but at the same time cross border use of the mobile phones (known as Roaming). The smart card is inserted into any GSM phone and bills be charged to the subscriber's personal account. A secret code (PIN) protects the subscriber from misuse and fraud. Replacing Cash In Singapore the Cash Card is a smart card, which as an electronic purse, i.e. it holds electronic money. In fact it is replacing coins and bank notes for everyday purchases. Why Electronic Money? It is more convenient than looking for change.
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Automating Transportation Services A few of the numerous examples of Smart cards in transportation are: Mass transit ticketing- using contact less smart cards passenger can ride several buses and trains for daily, commuting. BEST and the Railways are looking into this although a BEST smart card is already through trial operations. Urban Parking. Electronic tool collection- as the person drives through the tollgate of a bridge a smart card is inserted into an RF transponder within the car, which electronically pays the toll, without having to stop the car. Airline application- frequent flyer miles are added onto the airline smart card as the passenger' s ticket removed from it at the gate, eliminating paperwork. Smart Card Driving Licenses From the month of May Gujarat State has launched into a massive exercise for issuing its citizens microchip embedded Smart Driving Licenses. With a million of new licenses issued every year and 10 m old licenses to be converted into smart cards over the next two years, it has been ranked as one of the largest smart card application in the world The Ahmedabad RTO has so far issued around 3000 smart card licenses and in the coming months, the citys traffic police will be equipped with hand held card readers. These are essentially miniature computer terminals, capable of reading past offences on the 1- K microchip embedded in the licenses and recording fresh ones. Gujarat transport commissioner P.Panirvel plans to extend the new system to every major city in Gujarat over the next year, connecting them through V-SAT to a central data processing center. In the planning to introduce computerized weight bridges at the ten road entry points in Gujarat. In the next stage they are also planning to introduce computerized weight bridges at the ten road entry they are also Gujarat over the next year, connecting them through V-SAT to a central data processing center. In the next stage,
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INDUSTRY UPDATEINDUjkjjjjjj
Asia Pacific accounts for approximately 30% of worldwide smart card sales, making it the second-largest market after Europe. In Asia, India represents a great deal of potential and a very strong market is developing here after China and Japan.
Presently India has got approximately 50 million smart cards users with around 30% usage in Cell phone SIM cards. Indian smart card industry is growing @ 45% per annum. The smart card business potential of India is expected to reach US $ 6 billion by the year 2010. Presently, India has got around 3 million mobile phone users and it is expected to reach 8 million users by year 2003. The requirement of smart cards as identity cards, the combined municipal card and the welfare sector is expected to be 600 million by the year 2005.
The demand for smart cards in Health care & Transportation sectors is expected to reach 350 million by the year 2005. dustry Update Industry Update Industndustry Update ry Update International Interest
10 Member consortium consisting of Compaq, ProtonWorld, ACI, Gemplus, Schlumberger, Infineon, Datacard, Alittleworld, CMS, FSS, Mixtorf are planning to launch a multi-application smart card based payment infrastructure project in India.
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Orga is planning to provide 50 million cards (GSM Phone Cards and Banking Cards) in the Indian market by the year 2005. Intel is introducing research in chip development designing in India after Japan Domestic pharma biggies throng ThinkGen Smart Card plans for India
India India's first credit card manufacturing Versatile Cards Pvt. Ltd a part of $60 millionVersatile Cards Technology Inc. was unveiled recently. Association for security of Information Systems (ASIS) to evolve security norms & standards for Information Technology systems and also to provide certification to the hardware and software security products as well as technical Notable Smart Cards projects in India Employee's Provident Fund to issue smart cards soon for its 2.6 crore subscribers which would be accessed through its 267 offices.
Smart Cards for Government employees & Labour in Goa will be issued soon. ICICI Bank plans to launch smart cards with real time online integration for facilitating transactions, payments to utilities and services etc. Gujarat State Smart Card Driving licence - the biggest project of its kind in World. Delhi's traffic police is planning to introduce smart card driving licence. Rajasthan milk card project - the world's first milk collection point based on smart card technology in India run exclusively by women. Indian government & UNICEF have launched the village Watsan information system, which ensures the construction and maintenance of the wells.. Metro railway, Kolkota is going to issue smart season tickets instead of magnetic strip cards shortly. Petro cards - BPCL Prepaid cards used in cyber cafes of HPCL and many more Smart Loyalty Programme as in the case of Snowhite Apparels,HomeSaaz etc Smart dealership loyalty programme in the case of Hewlett-Packard India Ltd Smart Employee Management as in the case of LML Ltd, TVS Electronics, TVS Suzuki etc.
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Another important project is the Reserve Bank of India (RBI) sponsored SMARS (Smart Rupee) project. The project was launched in 1997 at the Indian Institute of Technology; the consortium includes banks such as the State Bank of India, Canara Bank and Citi Bank, terminal manufacturers like VeriFone India Pvt Ltd, systems integrators like, Aplab Limited, Ascom India Pvt Ltd, CMS Computers Ltd, and card manufacturers like Gemplus and Schlumberger. Mumbai Campus Scheme the SMARS (smart rupees) project involves the issue of smart cards to students and staff for use in around 150 on-campus merchants and retailers. Smart Health Management as in the case of Wockhardt Hospitals, Bhopal Gas Relief Project etc. Brihanmumbai Electric Supply and Transport (BEST) has now decided to introduce contactless cards for ticketing across its entire network etc.
1. Net Card : Launch a new virtual card with existing features and giving consumers the option of international acceptance as a value added feature 2. Attempt to aggressively tap Alumni associations of premier engineering colleges and Management institutions for Affinity Cards. Other banks are differentiating the market on the basis of affinity, corporate and co-branded cards. Target Segment 1) The potential segment in India is the postgraduate/professional/ technical courses student population, i.e. the young adults who are about to the workplace in the white-collar jobs. If these potential customers can be attracted when they are students, then Prospective Companies can ensure that they turn into loyal Prospective Companies Card members when they start earning. 2) The rural areas have a percentage of population with high income, which is not taxed. However due to logistic difficulties involved in serving this sector, these areas are largely ignored. If Prospective Companies and VISA/MASTERCARD set up card readers in rural and semi urban shops, they could obtain a captive segment. Perhaps large departmental stores socking a wide variety of consumer durables/ non-durables goods could be set up in selected areas to serve this segment. These stores would only accept the Prospective Companies Card its use and spread in popularity.
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Current strategy: On quality of service: After convenience and acceptability of credit cards, the most
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differentiation among credit cards fails to provide sustainable competitive advantage, as benefits offered on cards are easy to copy.
Positioning as a low cost card: This is not feasible as the costs involved
are higher than its competitors and also in this industry one cannot gain an SCA by competing on price and advantages can be gained only on the basis of service and innovative product features. Positioning on use: Credit cards in India are most often used while travelling. This
can be the main positioning plank because it would increase the credit card usage and has a good brand image it wont be thought of as a card exclusively meant for travel. family. Positioning as a card for transactions on the net: With the impending boom in e Positioning on acceptability: Acceptability is the most important factor in the minds
of the consumer and so positioning on this factor will add new consumers in the Citi
commerce in India, Credit cards should position itself as the best and safest medium for payment purposes. .
Recommended Positioning:
Positioning on use will help increase card usage and Positioning on acceptability will add new customers which will satisfy the dual objective of increased revenues and Increased
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The pricing for the cards shall be done on the basis of perceived value the customer attaches to the various products, and considering the fact that shall try to address products to the mass market. Since the competition is not on price but on innovation and value added benefits. Exceptions can be made for corporate, affinity cards as a goodwill gesture. Distribution
The distribution is mainly through existing branches of the Bank in the metros and other cities. The distribution is also done through Direct Sales Agents (DSAs). For other towns/ cities without bank branches cannot to be targeted as, in these places, setting up a distribution network by opening new branches is restricted by licenses and Govt. policy. Strategy: 1) To counter this Banks should go in for more tie ups with local banks to rapidly increase the reach for its credit cards. It should also identify Cities with high potential and direct the bank efforts towards them. 2) Agencies should be hired to oversee the operations of the DSAs in demarcated areas sothat there is regular and constant contact with them. 3) Objective credit rating systems should be formulated and clearly explained to the DSAs to reduce the losses due to bad credit. 4) Collection centers should be setup in all major cities so as to enable better customer service in line Citis customer satisfaction policy. Promotion and Advertising 1) The Launch of the card could be done in the following steps:
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Advertising strategy: From educating customers about credit cards there is a need to educate them about the differentiating factors of the cards. Because visa and master card are advertising regularly and thereby increase awareness. The strategy should be to emphasize on its differentiating characteristics. They should go in for major print campaign because the card has been positioned for a mass market. The media plan should consist of magazines like India Today, Outlook Secondly they also need to advertise in national newspapers because in a category like credit cards you are trying to differentiate your card from others on the basis of certain attributes and so advertising in TV may not be able to bringing the differentiation. They also need to identify potential customers and target hem using
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RESEARCH METHODOLOGY
A). Secondary data collection Business Periodicals Business Today Business Week Business world The Business Age Business chartered
Brochures SBI GE Credit Cards HSBC Credit Cards Standard Chartered Cards ( & other credit cards) Brochures (Citibank)
Web Sites www.citibank.com www.sbicards.com www.btstrategist.com www.plasticmoney.com www.cardsindustry.com www.myiris.com www.exhibitionindia.com www.responseservice.com www.money.com www.newssawal.com www.thehindubusinessline.com Studies / Surveys Business Today & ORG-Marg survey on credit cards (June 22 - July 6, 1996). NCAER study: Expanding Demand in the Consumer Market Study by Credit Card Management Consultancy A & M Survey (May 1997) Advertising & Marketing Related literature
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