AU Small Finance Bank, the only small finance bank that issues credit cards, expects to reach 10 lakh cards outstanding by the end of the current financial year, according to MD and CEO Sanjay Agarwal.

“Cards are growing at 30 per cent y-o-y. We are new in journey and the initial year base is so low, but we should end this year at around 10 lakh cards and then every year grow by around 30 per cent,” said Agarwal on the sidelines of an event.

Currently, the bank has around 6 lakh cards-in-force, with an activation rate of over 90 per cent and average spends of ₹20,000 per month.

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The bank is not building the cards portfolio to grow the unsecured loan book, but to provide depositors with options and encourage a long-term relationship with the bank, said Agarwal, adding that credit cards will play an important role in the journey of customer stickiness by retaining high-end customers and offering better services to customers that are rising up the income segments

It will eventually also offer cross-sell lending opportunities to the bank, but that will take some time because credit cards itself are a cross-sell product.

premium card

AU Small Finance Bank launched its premium credit card ‘Zenith Plus’, which will be offered to high-end existing salaried and business customers of the bank.

“SFBs have the kind of perception that we don’t deal with HNIs or high-end customers, which we want to break. Because from where will we get money to do the financial inclusion? If we want to lend to priority segments, which is our objective and design, we need money. And to get money is about the HNIs, affluent class and major cities,” said Agarwal, adding that in order to attract these customers, the bank needs to offer differentiating products which gives the customers respect and exclusivity.

“The word says small finance, it doesn’t say small deposit. For a small finance, we require deposits. And depositors expect us to offer one of the finest products on any side, whether it be deposits, savings or current accounts, personal or business loans, digital apps. We can’t go to customers saying we are new, we are small so our products are inferior. So, my credit card strategy is to have a hook to my depositors,” he said.

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In addition to flexibility and personalisation, credit cards also have an in-built feature of security because defaulting on payments impacts customers’ credit scores, he said, adding “that is why credit cards are not open risk because they have utility for customers also”.

As such, credit cards are safer to use when compared to debit cards, where frauds impact bank accounts, he said, adding that the bank in itself is not seeing any signs of concerns in terms of portfolio quality .More than 95 per cent of the bank’s card holders pay on time, and it has a revolver rate of around 32-35 per cent, he said.

On regulatory concerns regarding ballooning unsecured loans in the industry, Agarwal said increased credit card spends can’t be perceived as simply higher credit because spends are also being driven by convenience, utility and increased awareness about cards.