Professional Documents
Culture Documents
ReTechCon 2012
Rajeev Agrawal rajeev@innoviti.com
Why Is It Needed?
Consumers often postpone purchase due to lack of easy loans Merchants wish to pull in new customer segments
Loan options for consumers Issues
Revolving outstanding on credit card Personal loans from banks EMI from specific banks Consumer finance companies (Bajaj Finance)
High interest rate 2.99% per month Not instant, paper work, high interest rate 1.5% per month Limits retailers choice of credit cards accepted for EMI Not available in all market segments, high interest rate 14% per annum
Store Till
Acquiring Bank
Rajesh swipes his SBI card for Rs 1000 on 6th June at Vijay Mart
Vijay Mart gets Rs 1000 bank commission (e.g. 1.2%) on 7th June
Who Earns What? Case 1: Rajesh pays outstanding within due date
SBI has provided a loan of Rs 1000 to Rajesh for 45 days at 1.2% interest earned from merchant
Earns Rs 988 Rs 12
Pays Rs 1000 -
Case 2: Rajesh pays minimum within due date, balance outstanding next month
SBI has provided a loan of Rs 1000 to Rajesh for 45 days at 1.2% interest earned from merchant and Rs 900 for 30 days at 3% interest per month earned from Rajesh
Earns Rs 988 Rs 39
Pays Rs 1000 + Rs 27 -
Contribution
Transactor is biggest consumer segment for retailers and banks Transactor: Pays outstanding within due date Fence Sitter: Occasionally revolves outstanding Revolver: Often revolves outstanding
transactors
80% of credit limit on a transactor
card is unutilized
spending in retail
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How Does EMI Work, Who Pays Interest? Case 1: Rajesh Pays For EMI interest
6th Jun Rajesh buys for Rs 1000 on 3 months EMI @ 1% per month Party Rajesh Merchant Bank Earns Rs 1000 Rs 30 21st July Pays Rs 334 + Rs 30 (interest) 21st Aug Pays Rs 333 21st Sep Pays Rs 333
Pays Rs 1030 -
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Pays Rs 1000 -
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EMI Segments
accessories
Jewellery Furniture Department store
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HSBC 2%
HDFC 45%
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Pre-EMI: Jan-March 2011 Post-EMI: Jan-March 2012 Like period analysis of bills in bands
Due to EMI customers movement seen to higher value goods, leading to upselling
May 29, 2012 18
Mumbai, 13.38%
Delhi, 13.44%
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Pune, 6.00%
Ahmedabad, 3.48%
Kolkata, 5.51%
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6 Months 48%
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20,000
15,000
5,000
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6 Months 72%
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Sample Store Card sales per month EMI sales Margins (5%) Bank charges (1.2%) Margins net of bank charges
With EMI
Remarks
Rs 2,30,000 15% increase Rs 69,000 30% of all card sales Rs 11,500 Rs 1,932 Rs 9,568 Over store margins improve by Rs 2000 ~ 1%
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In Summary
improve margins by up to 1%
Typical conversion improvement on card sales is
30%
Unlike other financing options, available to all
merchants
Available for purchase of any value
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2% 2% 1% 2% 100%
8 9 10
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Thank You
Rajeev Agrawal rajeev@innoviti.com Please visit our stall No. 9 to share with us your feedback
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