IDFC First Bank may disrupt cards business with 9% interest – Times of India

MUMBAI: IDFC First Bank is set to shake up the credit card market by charging interest as low as 9% on revolving credit for those with a good track record. The private lender will also not charge interest on cash withdrawals during the 45-day free credit period.
This comes at a time when the market leaders in the credit card business are charging interest on revolving balances at the rate of 1.99% to 3.5% per month, which is about 40% annually. IDFC First’s credit card will not have an annual charge and reward points too would not have any expiry.

While not all cardholders will be eligible for the best rate of 9%, young customers without the required track record will be charged annual interest at 36%, which is still lower than leading players. The bank is looking at segmenting the market into wealthy global customers, those who are big spenders and have excellent credit records. For millennials and big spenders, the attraction would be relatively higher rewards, which will be available on all transactions except fuel and insurance premium.
The initiative is being driven by the bank’s chief operating officer B Madhivanan, who joined in the previous year from ICICI Bank, where he was chief technology officer and head of digital initiatives. Incidentally, IDFC First Bank’s MD & CEO V Vaidynathan too was head of ICICI Bank’s retail business before he moved to do a management buyout of Future Group’s financial service business, which was later merged with IDFC First Bank.
According to Madhivanan, the pandemic has redefined payments in the country with a huge shift to digital. “While the credit card market is crowded, we see scope for growth as many potential customers are facing barriers. Our strategy is to come out with a product, which does away with all the barriers, makes life simple and gives cardholders a rewarding experience,” Madhivanan said .
The credit card range comprising four variants — Millennia, Classic, Select and Wealth — will initially be offered to existing customers by invitation. The card will be launched for new-to-bank customers in March.