Low transaction volumes in credit and debit cards are forcing issuers, acquirers and transaction companies to offer sweeteners in the form of discounts and prizes.
In a bid to boost usage of both credit and debit cards, Visa will kick off an area development programme with its member banks in seven Tier II cities from July 15. Standard Chartered Bank has also started off a similar programme for credit card holders.
The Visa program will be conducted at seven Tier II towns -- Indore, Bhopal, Coimbatore, Nagpur, Kanpur, Lucknow and Nasik -- from July 15 to September 2003.
Visa, along with member banks, has tied up with around 100 merchants in each of these cities. Customers will be offered discounts of 5 to 20 per cent.
Also, for every purchase through a credit or a debit card above Rs 300, customers will be given a scratch card.
Standard Chartered has tied up with Tanishq where customers will be eligible for a diamond jewellery. The bank has, however, not specified any minimum amount for spends on credit cards to be eligible for the offer.
One of the major problems facing card issuers is the low transaction volume -- the situation is more acute on the debit cards front.
Around 95 per cent of the debit card transactions are ATM cash withdrawals with only the remaining 5 per cent being retail deals. The figure has remained constant over the past one year even as the number of debit cards has surged.
"Though there is an increasing issuance of debit cards in Tier II cities, plastics have remained in the wallets or are being used as 'glorified ATM cards'. It is a customer education issue. The debit card as a product is quite nascent," said Visa International's country manager of South Asia, Santanu Mukherjee.
Visa's debit card base grew 284 per cent to 5.4 million in March 2003 from 1.90 million in March 2002. It rose to around 6.5 million by the end of June 2003.
The total debit card base in the industry is currently at around 11.1 million. The growth in debit cards is due to a spate of public sector banks issuing debit cards and banks converting their ATMs cards into debit cards.
The growth in the credit card base has been comparatively lower at 30 per cent to 4.479 million in March 2003 from 3.44 million in March 2002. The average ticket size on debit cards is around Rs 800-900, while that of credit cards is at Rs 1800-2000.
Visa had started the area development programme in Vadodara in 2001, followed by similar programmes in Kerala and Chandigarh.
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