Two people in the know told ET that while Cred has already started distributing Axis Bank credit cards through its platform, Walmart-backed PhonePe is in the process of partnering with Axis Bank for the same.
For Axis Bank, this could offer a distribution heft given PhonePe boasts of a registered user base of 500 million and Cred claims to have more than 15 million members.
Responding to ET’s queries, a Cred spokesperson said, “Credit cards are part of the financial services offering … banking partners have the opportunity with Cred to engage and access a high-trust, low-risk community. As with all financial services products on Cred, we are taking a careful and responsible approach with this offering too.”
Also read | Cred’s FY23 revenue more than triples, losses grow marginally
A PhonePe spokesperson said, “PhonePe is considering various options in the area of credit and is excited about the opportunities possible in this area.”
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Axis Bank did not comment on the specific partnerships with the two fintech firms.Increase stickiness
“For both PhonePe and Cred, the key is user engagement, until they set up their own credit strategies and look at further cross-sell,” said a person aware of the discussions.
The move comes at a time when Cred founder Kunal Shah is seeking greater monetisation of its existing users by pushing services such as payments, credit and insurance.
Also read | Fintechs bet big on credit line on UPI but banks tread with caution
On the other hand, PhonePe continues to face the challenge of diversifying revenues from its mainstay payment business and drive the contribution of newer verticals to overall revenues.
“The strategy is very clear currently for fintechs–upsell and cross-sell to users and monetise, however you can. However, just distribution cannot be the main strategy,” said a fintech founder in the digital lending space.
For a fintech, the challenge remains on sourcing more creditworthy customers who meet a banking partner’s approval rate, while keeping acquisition costs in check.
“The success of these (distribution) partnerships also depend on risk performance of the portfolio sourced (by the fintech). Banks own the final risk and if these partnerships have a good approval rate, then these partnerships can work,” said Sanjeev Moghe, president and head, cards and payments, Axis Bank.
Credit card distribution is attracting new players
Even digital credit platform Freo is looking to make inorganic bets to bolster revenues from distribution of credit cards and other financial products.
“We (at Freo) may look at some inorganic acquisitions to increase our distribution of financial products. A non-cobrand pure-play credit card distribution (strategy for some fintechs) helps with keeping a platform customer engaged and adds to the topline of the fintech, through user monetisation,” said Anuj Kacker, cofounder, Freo, a digital banking platform.
The strategy around leveraging fintechs to distribute credit cards will allow banks to gain access to a cost-effective way of sourcing good quality customers. For the distributor fintech, it is to build pure play engagement and create additional monetisation on its captive base.
According to industry estimates, a platform can earn anywhere between Rs 500 to Rs 2,500 as commission fee at the time of sourcing each customer, depending on the credit quality of the customer.
“Banks are leveraging fintechs’ ability to keep the customers engaged more frequently and for a longer term. Banks can also profile and target the customers more accurately with the data captured by fintechs from the existing customers,” said Siddharth Mehta, cofounder, Kiwi, a platform which provides credit on Unified Payments Interface (UPI).
“Subsequently, commission models may evolve to trail income. This puts the onus on the fintech partners and not just the bank, to provide exhaustive avenues for the credit card holders to be continuously engaged with the product,” Mehta added.
Trail income, in this context, would mean additional commission earned by the fintech (above sourcing), based on the credit card usage and interest paid.
Two people in the know told ET that while Cred has already started distributing Axis Bank credit cards through its platform, Walmart-backed PhonePe is in the process of partnering with Axis Bank for the same.
For Axis Bank, this could offer a distribution heft given PhonePe boasts of a registered user base of 500 million and Cred claims to have more than 15 million members.
Responding to ET’s queries, a Cred spokesperson said, “Credit cards are part of the financial services offering … banking partners have the opportunity with Cred to engage and access a high-trust, low-risk community. As with all financial services products on Cred, we are taking a careful and responsible approach with this offering too.”
Also read | Cred’s FY23 revenue more than triples, losses grow marginally
A PhonePe spokesperson said, “PhonePe is considering various options in the area of credit and is excited about the opportunities possible in this area.”
Discover the stories of your interest
Axis Bank did not comment on the specific partnerships with the two fintech firms.Increase stickiness
“For both PhonePe and Cred, the key is user engagement, until they set up their own credit strategies and look at further cross-sell,” said a person aware of the discussions.
The move comes at a time when Cred founder Kunal Shah is seeking greater monetisation of its existing users by pushing services such as payments, credit and insurance.
Also read | Fintechs bet big on credit line on UPI but banks tread with caution
On the other hand, PhonePe continues to face the challenge of diversifying revenues from its mainstay payment business and drive the contribution of newer verticals to overall revenues.
“The strategy is very clear currently for fintechs–upsell and cross-sell to users and monetise, however you can. However, just distribution cannot be the main strategy,” said a fintech founder in the digital lending space.
For a fintech, the challenge remains on sourcing more creditworthy customers who meet a banking partner’s approval rate, while keeping acquisition costs in check.
“The success of these (distribution) partnerships also depend on risk performance of the portfolio sourced (by the fintech). Banks own the final risk and if these partnerships have a good approval rate, then these partnerships can work,” said Sanjeev Moghe, president and head, cards and payments, Axis Bank.
Credit card distribution is attracting new players
Even digital credit platform Freo is looking to make inorganic bets to bolster revenues from distribution of credit cards and other financial products.
“We (at Freo) may look at some inorganic acquisitions to increase our distribution of financial products. A non-cobrand pure-play credit card distribution (strategy for some fintechs) helps with keeping a platform customer engaged and adds to the topline of the fintech, through user monetisation,” said Anuj Kacker, cofounder, Freo, a digital banking platform.
The strategy around leveraging fintechs to distribute credit cards will allow banks to gain access to a cost-effective way of sourcing good quality customers. For the distributor fintech, it is to build pure play engagement and create additional monetisation on its captive base.
According to industry estimates, a platform can earn anywhere between Rs 500 to Rs 2,500 as commission fee at the time of sourcing each customer, depending on the credit quality of the customer.
“Banks are leveraging fintechs’ ability to keep the customers engaged more frequently and for a longer term. Banks can also profile and target the customers more accurately with the data captured by fintechs from the existing customers,” said Siddharth Mehta, cofounder, Kiwi, a platform which provides credit on Unified Payments Interface (UPI).
“Subsequently, commission models may evolve to trail income. This puts the onus on the fintech partners and not just the bank, to provide exhaustive avenues for the credit card holders to be continuously engaged with the product,” Mehta added.
Trail income, in this context, would mean additional commission earned by the fintech (above sourcing), based on the credit card usage and interest paid.