YES Bank plans aggressive credit card play

Open-sourcing refers to giving credit cards even to customers with whom the lender doesn't have a relationship

Private lender YES Bank, which is set to be the latest entrant in the credit card space, is looking at open-sourcing of customers to make quick inroads into the segment. Open-sourcing refers to giving cards even to customers with whom the lender doesn’t have a relationship.

“Unlike some other large banks that have a big customer base, we don’t have that and for us this will serve as a customer acquisition tool. Apart from the savings account, where we offer a higher rate of interest, this will also help in acquiring new customers,” said Pralay Mondal, senior group president, YES Bank.

After the 2008-09 crisis, when defaults had shot up in the credit card segment, almost all lenders had either stopped or significantly reduced open-sourcing. Even now, though banks have started offering credit cards to customers who do not have an existing relationship with the bank, it is limited to not more than 25 per cent. This is unlike the strategy that will be followed by YES Bank where open-sourcing of customers, where it is likely to go as high as 50 per cent.

The management is confident the bank would be able to maintain a healthy portfolio and won’t record a high number of defaults due to open-sourcing. “Even if we acquire people from outside, we will not make the same mistake. We won’t do indiscriminate lending,” Mondal said.

Apart from this, having the credit bureaus in place have also helped banks as they are able to provide a peek into the customer’s credit history. In order to grow the credit card business apart from focusing on the retail segment, YES Bank also plans to focus on the corporate segment which the bank believes hasn’t been significantly tapped into yet.

This is in line with the company’s strategy where it wants to grow its retail book and change its earlier positioning from primarily being a wholesale bank. It is with this strategy in place that the bank has been aggressively hiring for the retail segment.

“As of now about 80 per cent of the bank’s employees are in retail and going ahead we will be hiring more in retail. So incrementally about 90 per cent of the total hire will be in retail and we will also be expanding infrastructure, offering etc,” Mondal said.