What was once a transaction between the bank and you is seeing new entrants, some whose core business model is not even in the financial services space.
There are over 5.86 crore outstanding credit cards in India as of September 2020, according to a Reserve Bank of India (RBI) data on ATM, acceptance infrastructure and card statistics.
Most credit card users in India use their respective banks’ website or smartphone application to pay their monthly bill. Well, hold that thought, because it’s not entirely true.
You can now pay your credit card bill through platforms such as CRED, a credit card bill payment rewards app; PhonePe, a digital wallet provider; Paytm, a digital wallet and financial services firm; and the newest entrant Amazon India (through Amazon Pay, its digital wallet).
We (afaqs!) were intrigued to read Amazon India’s foray into credit card bill payment space. For starters, its core business model is that of an online marketplace. So, to see it go up against banks and even CRED, whose business model is of reward credit bill payment, is quite interesting.
“… your overall spend on your card is a great surrogate of your income,” says Upendra Namburi, CEO, Ideaearth (he has worked with SBI Card as VP, strategy, CSR, and digital; and ABN AMRO as VP, direct banking in the past).
Referring to CRED, he says that the model is saying, how can I find richer people in India? That’s the entry route to engage them… “It’s a great way of getting many insights into the consumers,” Namburi goes on to say.
When two people buy a smartphone, does it mean they are similar? No, they are not. Says Namburi, “You need external insights and data to better understand the person who is buying a POCO phone. So, this is actually a game of insights.”
When Amazon looks at one person’s Rs 50,000 bill payment over three months and the Rs 3,000 bill of another person, it understands the different income levels of these individuals and “gives you a huge lens into the person, and his ability to spend on Amazon.”
Amazon already has Amazon Pay, and if it’s aspiring to enter financial services like CRED, this a great way, says Namburi.
Another aspect which hit us was the readiness of a consumer, who may or may not shop online, to share all these OTPs and card numbers online to pay the bill…
“Look at the frequency of usage and trust. If you are a regular Amazon user, that means you see it at least 2-3 times a week… Now every time you buy, your trust factor increases,” says Namburi. “There are many people who’ve saved their credit card on Amazon and enter their CVV when it comes to checkout”
Namburi also says that if he goes to a kirana store and the owner tells him to make the payment through the POS machine, he will hesitate because that’s not what he associates the (kirana) store with…
CRED was establishing a brand and, hence, it needed to put up a monetary incentive. But “where you have frequency and trust, you don’t need that much monetary incentive…,” Namburi signs off.