Swiggy takes cobranded credit card battle to Amazon and Flipkart turf, with a catch

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Food delivery firm Swiggy has partnered with the country's largest private sector lender HDFC Bank to launch a co-branded credit card. The card will offer a hefty 10 percent cashback on food delivery grocery delivery under Instamart and its dining out platform Dineout. The card will be hosted on the Mastercard network.

The cashback offered is much higher than the usual five percent offered by brands for shopping on their own platform. For instance, Amazon, Flipkart, Paytm and Tata Neu only offer around five percent as cashback even though occasionally there could be a few extra offers. The Paytm and Tata Neu co-branded credit cards are also in partnership with HDFC Bank.

The Swiggy-HDFC card will also offer five percent cashback on shopping across other e-commerce platforms such as Amazon, Flipkart, Myntra, Nykaa, Ola, Uber, PharmEasy, NetMeds, BookmyShow, and several others, the statement said. In fact, with an Amazon-ICICI credit card, a customer cannot get five percent cashback on Flipkart and vice versa. Hence the Swiggy card makes more sense for anyone who shops across these platforms.

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In one fell swoop, the card could make Amazon-ICICI and Flipkart-Axis credit cards irrelevant for most users as the cashback remains the same whether a customer uses the Amazon card, Flipkart card or the Swiggy card. However, there is a catch. The benefits of such high rewards can be reaped only if the customer uses Swiggy a lot every month. Because the cardholders will get cashback in the form of Swiggy Money, which can be used only on Swiggy.

However, the only catch being that the cashback will be deposited as Swiggy Money and can be used only on Swiggy. If a customer's monthly grocery purchases are more than Rs 4,000-5,000, it must not be difficult to use/exhaust the Swiggy Money buying grocery on Instamart.

For reference, even the Amazon ICICI credit card offers the cashbacks as Amazon Pay Balance and can be used only on Amazon and its partner merchants. However, the use cases of exhausting the Amazon Pay Balance is much wider with the platform offering insurance, flight tickets and hotel bookings.

The credit card launch and the aggressive cashback offers is happening at a time when Swiggy is gradually losing market share to Zomato and its grocery delivery platform Blinkit. The credit card could help cultivate loyalty and drive up its usage.

HDFC is the country's largest credit card issuer. The bank has issued close to two crore credit cards in the country whereas the overall number of credit cards in the country stands around 10 crore as of June 30, according to RBI data.

Earlier this year, Swiggy's Gurugram-based rival Zomato had ended its co-branded card partnership with RBL Bank, which also offered 10 percent cashback on its premium Black edition, while the Classic edition offered only five percent cashbacks. It is not clear why the partnership has not worked out.

Some of the co-branded credit cards have been a runaway success among customers over the last four-five years with both Amazon and Flipkart adding 40 lakh users each. These cards see fully digital onboarding of the majority of the users apart from high usage and activation rates. Paytm has around seven lakhs customers for its cards.

Today, Amazon ICICI credit card is almost 30 percent of the ICICI credit card portfolio and the Flipkart Axis credit card is almost 40 percent of Axis Bank's credit card portfolio, indicating the importance of a successful cobranded partnership for banks. HDFC does not have such a huge success as of now. Today, one in three credit cards are cobranded credit cards whereas it was just 10 percent a decade ago. This has been driven by the new-age consumer internet brands.

While airlines, offline retail brands and oil marketing companies cards' used to be popular a decade ago, digital brands have taken their place as customer spending has also shifted towards the platform and has often demonstrated loyalty and stickiness.

For instance, the overall credit card spending on digital platforms were close to Rs 90,000 crore during the month of June, whereas the credit card spending at Point of Sale terminals (or offline channels) stood at Rs 50,000 crore, that is almost 80 percent higher on online platforms.

While there are around 10 crore credit cards in the country, the unique number of credit card users is only around four crore. Most power users will have multiple cards and uses the cards to maximise value or cashbacks. Adding a Swiggy credit card will not hurt such users.

The cashback benefit of five percent is also applicable on branded websites like Nike, H&M, Adidas and Zara among others. Similar to Amazon and Flipkart credit cards, this card also offers one percent cashback on all other spending.

“We recognise that modern-day consumers actively seek rewards, offers, and cashback programs that add value to their spending,” said Rahul Bothra, Chief Financial Officer of Swiggy.

As a welcome benefit, the card is also offering a three-month Swiggy One membership that offers free delivery and additional discounts. The credit card will be rolled-out in a phased manner on the Swiggy app over the next 7-10 days, post which all the eligible customers will be able to apply for it on Swiggy app and HDFC website.

“We strive to offer innovative and tailored solutions to meet the evolving needs of our customers. Dining and Grocery are at the core of customer’s daily needs, and with this strategic collaboration we are offering convenience of both categories bundled with great value,” said Parag Rao, country head for payment business, consumer finance, technology and digital banking at HDFC Bank.