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Co-branded credit cards are experiencing a surge in popularity in the country and are poised to grow 2x faster than traditional credit cards, according to a report by RedSeer Strategy Consultants and Hyperface.

The report says co-branded cards, which account for 12-15% of total credit cards issued, are projected to capture over 25% of the market share by volume by FY28, growing at a CAGR of 35-40% from FY24 to FY28. In contrast, traditional credit cards are expected to grow at a more modest rate of 14-16% during the same period.

The share of co-branded cards surged from 3-5% to 12-15% of all credit cards issued from FY20 to FY24.

Between FY24 and FY28, the transaction volume of co-branded credit cards is expected to grow at a CAGR of 45-50%, while transaction value will grow at 55-60%. By FY28, co-branded credit cards are projected to account for 22-25% of transaction volume and 33-35% of transaction value.

Notably, the average spend per co-branded credit card is 1.2 times higher than that of traditional credit cards.

In addition to higher spending, co-branded credit cards also boast a superior activation rate compared to traditional credit cards. While traditional credit cards have an activation rate of 50%, co-branded cards have a 70% activation rate.

Unique value proposition—in the form of tailored rewards and exclusive benefits through strategic partnerships between banks and brands—is driving the growth of co-branded credit cards, says the report.

For long, co-branded credit cards were associated with fuel companies in India, which offered customers discounts and rewards on fuel purchase. Over the years, several sectors such as ecommerce, travel, dining, and entertainment have embraced these cards. Currently, ecommerce dominates the space, with 75-80% of co-branded credit cards issued, the report notes.

Redseer is a strategy consulting firm, while Hyperface is a credit cards innovation platform.