1. Market Analysis
Part A
Assumptions
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Calculated the Market for students taking loans for upskilling in India itself
India’s population is 1500 million.
Average life expectancy of 75 years
Population is equally distributed among each age group.
Equal ratio for male and female
Rural to Urban population ratio is 2:1.
Students which have completed undergraduate course are eligible
Students have completed undergraduate course by 20 years of age
Science, Engineering & Technology and Commerce students make up around 40% students
Urban Area – 20% Males and 10% Females go for masters course
Rural Area – 10% Males and 5% Females go for masters course
Buffer taken for ~20%
Average course fees for upskilling/loan around INR 1,00,000
Credit Card affordability for Urban is 50% and for Rural is 20% for Males
Credit Card affordability for Urban is 30% and for Rural is 10% for Females
India's Population - 1500 Million
Rural-Urban Divide
Rural Population (1000 Million)
Urban Population (500 Million)
Target Audience
Age Distribution
Population in 21-30 Age Group (~135
Million)
Population in 21-30 Age Group (~67
Million)
Gender Based
Distribution
Males (~70
Million)
Females (~70
Million)
Males (~35
Million)
Females (~35
Million)
Masters Course
Audience
Males opting for
masters course
(~7 Million)
Feales opting for
masters course
(~3.5 Million)
Males opting for
masters course
(~7 Million)
Masters Course
Target Audience
for Skilling/Loans
Males opting for
masters course
and require
skilling/loan
(~2.8 Million)
Females opting for
masters course and
require skilling/loan
(~1.4 Million)
Males opting for
masters course
and require
skilling/loan (~2.8
Million)
Feales opting for
masters course
(~3.5 Million)
Females opting
for masters
course and
require
skilling/loan (~1.4
Million)
Credit Card
Affordability
~0.56 Million
~0.14 Million
~1.4 Million
Total Target
Audience
Total Yearly
Market
3.0 Million (Taking ~20% buffer)
30,000 Crores
~0.42 Million
Part B
Competitors List
•
•
•
•
•
•
•
•
Eduvanz
HDFC Credila
Avanse Financial Services
Kuhoo Technologies
Prodigy Financial Services
Propelled
Credenc
MPower
Partners List
•
•
•
•
•
•
Winvesta
Xpats
Pax Credit
IDFC First Bank
BOB Financial
Jupiter
2. Strategic Alignment
Part A
•
•
•
•
Ensure that easy, accessible and affordable financial solutions are provided to Indian
Youth who have to face challenges in acquiring funds.
Enable the youth to go for higher education and help in professional growth.
Forming strategic partnerships with educational institutions, student organizations and
other relevant stakeholders and help in reaching out to more potential borrowers.
Enabling the youth to understand financial services and products which will lead to
leveraging technology and innovation in products and services offered.
Part B
•
•
•
Increase in customer lifetime value – cross selling and upselling of credit cards to existing
customers will increase customers lifetime value to the business and along with engaging
them in additional products offerings can lead to more longer and profitable relationships
Improved customer retention – this will enhance overall value proposition of customers
and can lead to higher customer satisfaction and retention rates.
Enhanced customer insights – cross selling and upselling can provide valuable insights
into customers financial needs and behaviors, which can be used to refine products
offering, marketing strategies and introduction of new products.
•
•
•
Synergy in marketing efforts – cross selling products to customers with which you already
have a relationship is more cost effective than acquiring new customers. Existing
communication channels and customer database should be leveraged to promote credit
cards.
Tailored offerings – tailoring the credit card offerings to suit the needs of students and
professionals by offering benefits such as cashback on educational expenses, discounts on
books or supplies, rewards for responsible credit card usage, additional benefits on online
shopping for electronic devices and upskilling courses.
Educating and supporting – providing educational resources and support to help
customers understand the benefits and responsibilities of using a credit card, and this will
help customers make informed decisions and manage their finances effectively.
3. Financial Model
Part A
Credit Card make majority of their revenues from below given verticals:
•
•
•
•
•
•
•
•
Interest Charges – vary from 1.5% to 4% monthly based on offerings and banks
Annual fees – can vary from 0 to 10000 but in case of educational credit card most of the
credit card don’t charge any annual fees
Late Payment Fees – are based on slabs in outstanding amount and is between 0 to 1500.
Transaction fees
Cash advance fees when customers use credit card to get cash out of ATM
Conversion of outstanding into EMIs
Reward point redemption revenue
3rd party product sale commission
Assumptions
•
•
•
•
•
•
•
•
•
20% of the market captured.
1,00,000 lakh is credit issued for 1-year duration
No annual fees
Assuming 20% of customers paid interest charges
Assuming 10% of customers paid late fee charges
500 per month for late fee charges
2% for transaction fees for credit card
Monthly 15000 spent on credit card transactions
Only revenue from major streams are considered which are interest, annual fees, late
payment fees and transaction charges
Particulars
Annual Fees
Interest Charges
(2.25%)
Late Fee Charges
Transaction Fees
(2%)
Total Revenue
Monthly
Total Yearly
Revenue
Revenue
0
22,500,000
30,000,000
180,000,000
232,500,000
2,790,000,000
Part B
Credit Card incur majority of their costs from below given verticals:
•
•
•
•
•
•
•
•
•
•
Card Issuance Costs: These include costs related to printing and issuing physical cards, as
well as any associated packaging and shipping costs.
Marketing and Customer Acquisition Costs: This includes expenses for marketing
campaigns, advertising, promotions, and any incentives offered to attract new cardholders.
Processing Costs: These include fees paid to payment processors for transaction
processing, as well as costs related to fraud detection and prevention.
Customer Servicing Costs: This includes expenses related to customer service
operations, such as call centers, online support, and dispute resolution.
Credit Risk Costs: These include costs associated with credit risk management, such as
credit scoring, underwriting, and collections.
Compliance and Regulatory Costs: This includes expenses for complying with regulatory
requirements, such as data protection laws, anti-money laundering regulations, and
consumer protection laws.
Technology Costs: These include costs for maintaining and upgrading technology
infrastructure, such as card processing systems, online banking platforms, and mobile
apps.
Interchange Fees: While interchange fees are a source of revenue for card issuers, they
also represent a cost for merchants. Understanding interchange fees is important for
pricing strategies and cost management.
Reward Programs: If your credit card offers rewards or loyalty programs, you'll need to
factor in the costs of administering these programs and fulfilling rewards.
Other Operating Expenses: These include general overhead costs, such as rent, utilities,
salaries, and administrative expenses.
Assumptions
•
20% market share has been acquired by us
•
•
•
•
•
•
•
150 is cost incurred for card issuance (50 for making, 50 for delivery to customer and 50 for
transportation, handling and other miscellaneous)
Card validity is 3 years
3000 is customer acquisition cost
0.5% of transaction amount paid in processing cost
Customer servicing cost of 600 yearly
10% cost incurred in credit risk, technology cost, maintaining servers and others annually
Other expenses contributing to 30%
Particulars
Card Issuance Cost
Marketing and
Customer
Acquisition Cost
Processing Cost
Customer Servicing
Costs
Credit Risk Cost
Other Expenses
Total Monthly Cost
Total Yearly Cost
Revenue
2,500,000
75,000,000
40,125,000
173,875,000
2,086,500,000
Monthly Profit
Yearly Profit
58,625,000
703,500,000
50,000,000
3,750,000
2,500,000
4. Risk Assessment
Part A
•
•
Regulatory Compliance: Credit card issuers are subjected to strict regulations and
compliance requirements from Reserve Bank of India (RBI) and failing to comply with these
regulations can lead to fines, penalties, reputational damage and even cancellation of
licenses.
Credit Risk: Issuing credit cards involves the risk of borrowers defaulting on their payments
and this risk increases when targeting students and young professionals who may have
limited credit histories or financial stability. Also, risk is associated for students or young
professionals not able to secure jobs after completion of course which may lead to them
not being able to pay the EMI.
•
•
•
•
•
•
•
•
Fraud Risk: Credit card transactions are susceptible to fraud, including unauthorized
transactions and identity theft. Implementing robust security measures is crucial to
mitigate this risk.
Interest Rate Risk: Fluctuations in interest rates can affect the profitability of credit card
operations. Rising interest rates can lead to higher borrowing costs and lower margins
leading to reduced profitability.
Market Risk: Changes in the overall economic environment, such as recession or changes
in consumer behavior, can impact credit card usage and repayment patterns.
Operational Risk: This includes risks related to the day-to-day operations of issuing credit
cards, such as system failures, data breaches, and human error.
Reputation Risk: Any negative publicity, such as a data breach or poor customer service,
can damage the reputation of the credit card issuer and lead to customer attrition.
Competition: The credit card market is highly competitive, with many established players.
New entrants must differentiate themselves and attract customers in a crowded market.
Technology Risk: As the credit card industry evolves, staying abreast of technological
advancements is crucial. Failure to adopt new technologies can lead to obsolescence and
loss of competitiveness.
Liquidity Risk: Issuing credit cards requires maintaining sufficient liquidity to meet the
demand for credit card transactions and repayments.
Part B
•
•
•
•
•
•
Comprehensive Risk Management Plan: Developing a detailed risk management plan that
identifies potential risks and outlines strategies to mitigate them and this should include
credit risk, fraud risk, operational risk, and regulatory risk.
Robust Compliance Program: Ensure compliance with all relevant regulations and
standards, such as those related to data security (e.g., PCI DSS), consumer protection, antimoney laundering (AML) laws and Reserve Bank of India guidelines and regulations with
respect to banking system.
Credit Risk Assessment: Implement strict credit underwriting standards to assess the
creditworthiness of applicants and mitigate the risk of defaults. Use of credit scores,
income verification, and other relevant information to assess the creditworthiness of
applicants before issuing credit cards.
Fraud Prevention Measures: Utilize advanced fraud detection technologies and implement
stringent security measures to protect against unauthorized transactions and identity theft.
This can include using secure payment systems, monitoring for suspicious transactions,
and educating customers about protecting their card information.
Customer Education: Educate customers about responsible credit card use, including the
importance of making timely payments and monitoring their accounts for unauthorized
activity. Provide educational resources to help customers understand how credit cards
work, including interest rates, fees, and repayment obligations.
Diversification: Diversify your credit card portfolio by targeting different customer
segments and offering a variety of card types to spread risk.
•
•
•
•
•
•
•
•
Liquidity Management: Maintain sufficient liquidity to meet the demands of credit card
transactions and repayments, especially during periods of economic uncertainty.
Technology Investment: Invest in advanced technology and security systems to protect
against cyber threats and ensure the smooth operation of your credit card program.
Partnership with Reputable Providers: If partnering with third-party service providers,
ensure they have a solid reputation and comply with all relevant regulations.
Regular Monitoring and Review: Continuously monitor your credit card portfolio for signs
of risk and regularly review your risk management strategies to ensure they remain effective.
Credit Limits: Setting appropriate credit limits based on the applicant's financial situation
and credit history (using CIBIL score or last 6 months UPI transactions and one year bank
statement will help in better understanding the financial worthiness of the customers).
Also, avoiding extending credit limits that are beyond the customer's ability to repay.
Monitoring and Reporting: Regularly monitor customers' credit card usage and payment
behavior. Set up alerts for late payments or high utilization rates. Report delinquent
accounts to credit bureaus promptly.
Collection Strategies: Have effective collection strategies in place to recover outstanding
debts. This can include early intervention with delinquent accounts, offering repayment
plans, and, if necessary, using debt collection agencies.
Risk Segmentation: Segment your customer base based on their credit risk profiles. This
can help you tailor your credit card offerings and risk management strategies to different
customer segments.
5. Operational Model Recommendations
Part A
In House Credit Card – Advantages
•
•
•
•
•
Building an in-house credit card offering provides full control over the features, pricing, and
marketing of the credit card. The card offerings can be tailored to suit specific target market
and business objectives.
Having own branded credit card can help strengthen customer loyalty and increase brand
recognition.
Customers may be more inclined to use a credit card that is associated with a brand they
trust.
Issuing own in house credit cards allows one to capture a larger share of the revenue
generated from interest charges, late fees, annual fees, and transaction fees.
Managing the in house credit card program, enables direct access to valuable customer
data that can be used to improve marketing efforts, product offerings and customer
experience.
In House Credit Card – Disadvantages
•
High Initial Investment: Building an in-house credit card program requires a significant
initial investment in infrastructure, technology, marketing, and regulatory compliance.
•
•
Regulatory Compliance: Managing a credit card program involves compliance with
complex regulations, which can be challenging and costly.
Risk Management: Issuing credit cards comes with inherent risks, such as credit risk, fraud
risk, and operational risk. Managing these risks requires expertise and resources.
Partnering with an Existing Credit Card Provider - Advantages
•
•
•
•
Partnering with an existing credit card provider allows you to quickly launch a credit card
program without the need to build infrastructure from scratch.
Existing credit card providers have expertise in managing credit card programs, including
regulatory compliance, risk management, and customer service.
Partnering with an existing provider can be more cost-effective than building and managing
an in-house program, especially for smaller businesses.
Credit card providers often offer advanced technology and services that may be difficult or
costly to develop in-house.
Partnering with an Existing Credit Card Provider - Disadvantages
•
•
•
Partnering with a credit card provider means you have less control over the features, pricing,
and branding of the credit card.
A portion of the revenue generated from the credit card program will likely have to be shared
with the credit card provider.
Using a co-branded credit card may dilute your brand's identity, as the card will also carry
the branding of the credit card provider.
Part B
Recommendation - Go with existing credit card provider
•
•
•
•
•
It is critical to understand that venturing into any new business vertical will require a need to
build infrastructure from scratch, technological innovation, need to maintain strict
regulatory compliance and adhere to regulations by Central Banks and financial
institutions.
Outsourcing the credit card business will enable us to exploit the customer base of the
existing player in cross selling of our inhouse products.
Outsourcing will also help in keeping our books profitable as investments would not be
required in building of credit card system from zero.
We can work with a consulting group that thoroughly understands the nuances and pricing
structure of providers in the market and help us in identifying right partner with whom we
should integrate.
But with time, when our product has matured enough and we have gathered good enough
market then we can go about developing the necessary infrastructure in order to launch our
own credit card.
6. Implementation Plan
Milestones
Product Research and Finalization
Identification and Preliminary discussion
with Credit Card Partners
Finalization on product offering and
commercials with Credit Card Partners
Preparing Marketing and customer
acquisition plan with sales and marketing
team
Rolling out the product
Customer Acquisition
10000 Customer acquisition
20000 Customer acquisition
50000 Customer acquisition
100000 Customer acquisition
200000 Customer acquisition
400000 Customer acquisition
600000 Customer acquisition
Timeline
June'24
July'24
August'24
September'24
September'24
Timeline
March'25
June'25
December'25
June'26
December'26
December'27
June'28