HDFC Bank draws up groundwork to regain credit card market share

Will come back with a bang once RBI lifts freeze, says bank

With the Reserve Bank of India (RBI) barring it  from issuing new credit cards, HDFC Bank says it is laying the groundwork for getting back to the market “with increased rigour”, once the embargo is lifted.

HDFC Bank remains the leading player in credit cards, but other players have been gaining market share at its expense in the past few months because of the RBI action.

According to RBI data, in the period between December 2020 and April 2021, HDFC Bank's credit card base contracted by 389,424, while ICICI Bank's credit card portfolio increased 815,480. SBI Card and Axis Bank added 437,226 and 329,800 cards, respectively.

In an analyst call organised by Credit Suisse, Parag Rao, country head-payments business and in charge of technology transformation and digital agenda of the bank, said the embargo is a temporal thing and it has plans firmed up. "We are going to get back in the market with increased rigour," he affirmed. 

“We have been sourcing liability customers aggressively over the past six months. We have a full set of customers pre-approved and pre-scrubbed. As soon as things open up, we will be back with a bang. Some of the shift in market share witnessed lately will soon get corrected," he clarified. 

Irked with the repeated outages, the RBI, in December, asked the lender to temporarily halt all its digital launches as well as new sourcing of credit card customers. As of April, HDFC Bank has a credit card base of 14.91 million. 

“Our focus is on building a strong, engaged set of customers for our card base, which is why we enjoy a significant volume market share, spend market share, and our card base is the most active. Soon you will see both metrics increasing significantly, in terms of market share," said Rao.  Although the market share in the number of cards outstanding has dropped in the past six months, the market share in spends has not. If anything, it has gained a few basis points in the last few months, claimed the management. 

The bank, after the RBI’s actions, is working on improving its infrastructure, so that it is future-ready and such happenstances become fewer. 

“...some of the incidents witnessed are a combination of rapid scale build-up, and, maybe, infrastructure not keeping pace. Having said this, we have understood there is a need to change," added Rao. 

The bank is following a two-pronged approach for its transformation, so that it is ready for the next 25 years. The management said it is modernising the existing bank and has created a vertical within the bank called an 'enterprise factory'. It consists of the existing technology (tech) and digital resources of the bank and a new set of people who will be jointly looking at modernising and digitising the current infrastructure of the bank. And, they have created another vertical called the 'digital factory', housed with very competent resources focused on building a digital platform for the bank. 

“Put together, the enterprise factory and the digital factory will be the fulcrum of the transformation of HDFC Bank," said Rao. 

There was an audit by a third-party tech auditor, who prepared a report and has submitted to the RBI. The regulator and the bank are engaged in discussions. It is under evaluation by the RBI, said the bank's management. 

Rao also said the bank is revamping the PayZapp application and SmartBuy, and, in a few months, there will be a newer version of these properties. Unified payments interface payments on PayZapp will be one of the major drivers of growth in that space. 

“Our strategy will be to continue to dominate in the conventional payments space and use partnerships and our large customer base in the newer payment forms," he added.