Imagine a win-win-win proposition. A situation where the three parties involved have their cake and eat it too. This is something pretty close to what co-branded cards offer. A unique arrangement worked out when the synergies of a card-issuing bank and a company come together.

What began in 1990, when MasterCard and Bank of India tied up with the Taj Group of Hotels to launch the Taj Card for persons who frequently travel and stay at the hotel chain, is today a much-followed trend. There are about a dozen co-branded cards and plenty more affinity cards in the market today.

The co-branded cardholders are entitled to all the advantages of a normal credit card at no additional fee (which is normally Rs 750) but some exclusive privileges and rewards. The company, which has entered into the co-branding arrangement with a bank, automatically gets assured of some additional sales becausethose who own these cards often use them to earn points and get discounts. Moreover, the company is guaranteed of continued loyalty from a certain section of customers who own these cards. And then it gets easy access to their customer base and profile which they themselves don't need to maintain.

The bank, on the other hand, has another cardholder to its credit, one that dotes on a particular product or a club and is, therefore, not likely to default.

The most popular amongst the existing brigade of co-branded cards is the IndianOil-MasterCard-Citibank credit card that has over 30,000 members. The card has several advantages, like no transaction fee for petrol purchases at the IndianOil petrol pumps. The bank rewards the cardholder with one point for Rs 100-worth of petrol bought at all locations and double the points for purchase of IndianOil products at all IOC pumps. The cardholders can redeem these points against petrol purchases. They are given petrol coupons which can be redeemed for the purchaseof petrol. These are benefits over and above those offered on a regular Citibank-MasterCard credit card.

``We conducted a survey and found that not everyone avails of our redemption scheme,'' says M. N. Murli, Marketing Head, BankCards Division, Citibank. Citibank, that has an over 50 per cent market share in the credit card segment, sends a free gifts catalogue to all its cardholders for the redemption of points. Even though the subscription rates for Citibank's co-branded and affinity cards are not lower, the cardholders get additional advantages offered by the company, club or institution that has entered into an arrangement with Citibank.

Co-branded cards are fetching good business to banks. For example, in 1998, 46 per cent of cards issued by Citibank were acquired from co-brands and affinities. More often than not, these cards are successful in luring its targeted segment. For example, Citibank's women cardholder ratio went up from 7 per cent in 1997 to 15 per cent in 1998 with the launch of theWomen's Card. Citibank has so far issued seven co-branded credit cards with companies like Philips, Vysya, Times Bank, Orientel Bank of Commerce, British Airways and Maruti Udyog Limited. Besides, Citibank has about a dozen affinity cards like the CRY card, WWF card, Women's card, the India Habitat Centre card and the Calcutta Club card, Army and Air Force and the Cricket card. It has also joined hands with schools and colleges to give an exclusive card to their alumnus.

Affinity cards are mostly linked to a cause. For example, a certain percentage of spends on the Citibank-MasterCard-Indian Army affinity card goes to the War Widows Association. And mostly, the subscription rates are lower too. For instance, Citibank charges no annual fee for the first year of membership of the Indian Army card and a special rate for its renewal. Moreover, the card can be used at all CSD canteen stores.

``Co-branded and affinity cards have more snob value,'' says Kumar Weerasuriya, Director, Area Countries, south Asia.According to him, since these cards target a certain group, they work out a lot cheaper for the banks. ``The turnovers and transactions in the case of these cards are higher. Attrition is much less. And the cost to the issuer in terms of default and the recovery is also lower,'' he says. Moreover, the allied company automatically gets committed to giving discounts to the card user.``In the developed world, co-branding is a matured business. In India, its still at a nascent stage,'' says Weerasuriya. He feels within a few years, at least 30 per cent of the market will consist of co-branded or affinity cards.

But not all banks are going in for co-brandings. American Express, for instance, launched a credit card last year that offers a lower interest rate per month on the credit. This interest rate is 1.99 per cent per month, as against 2.95 per month charged by other banks. This results in saving of almost 12 per cent per annum. Though the subscription rate is much higher at Rs 995 the card offers abalance transfer scheme whereby the cardholder can transfer outstandings on all cards to the Amex card and save on the interest rate. ``Our research tells us that most customers pay 60-70 per cent on a credit card as interest charges. Only about 30 per cent goes towards the annual fee,'' says Sujit Mittra, Head, Public Affairs and Communications, American Express. He feels that offering `good value' in the form of lower interest charges has more advantages over co-branded arrangements.

Statistics tell us that recession or no recession, the Rs 1,600-crore credit card business is growing and at a healthy rate of 25-30 per cent per annum. The market leader claims of a rate of growth of 15 to 20 per month. But according to Murli and Mittra, fixation for cash continues to player spoiler in the growth of plastic money. Then again, the scope for growth is unlimited. Especially in light of the fact that only 3 million persons in the country own credit cards out of a population of 14 million tax payers.