Wednesday, December 17, 2014

Mumbai Police's verification drive for cab drivers

My email to Commissioner of Mumbai Police on verification drive for Cab drivers - requesting him to bring the tourist taxis as well as private drivers also under this drive. Though I did not hear back - I am hoping that they have at least read my email..:)
Dear Mr. Maria,

I am a Mumbai resident and writing to thank you for initiating the verification process for cab drivers in the aftermath of the very unfortunate Delhi incident. This move will definitely reinforce a sense of safety among the Mumbai citizens. However, from the news I understand that this process is being initiated only for Black & Yellow cabs, cool cabs and radio cabs leaving out the tourist permit cabs and more importantly thousands of drivers who drive private cars. While no doubt the first priority of the authorities would be to ensure that drivers of vehicles with taxi permits are screened and verified - I would urge you to also include the tourist permit taxis to also undergo this process as well as ask all those who employ paid drivers for their private vehicles to do the same. The reason why I am requesting this is because there are number of taxi operators (besides the aggregators like Uber, Ola and Taxi for sure) who provide tourist permit vehicles for both intra and inter city transport including liveries such as Avis, Orix etc. (many of which ferry office staff almost on a daily basis) and there have been similar incidents in the past involving drivers of such tourist taxis including the one in Dehradun few months ago and in Bangalore a few years ago.Similarly, currently there is no way for people who employ a driver for their private vehicles to check his antecedents except to rely on references provided by the driver himself which can be easily forged and a verification process which is laid down by authorities can be a big help in assuring people. In fact,few years ago when I was hiring a driver I actually called up 100 number to check on the verification process and was told that there was none and was instead advised to take a photocopy of his ID proof - which was a bit worrying for me because the driver is in the possession of your car and if he is a rogue element he can potentially create a lot of trouble using that car. Therefore, if as part of this drive if all such drivers are also asked to register themselves (like it is done for domestic help) - it would be really great. Of course, to avoid over burdening the police staff, the onus for such registrations should be put on the private drivers and their employers within a certain timeline. As a concerned citizen, I am taking this liberty of writing directly to you on this, for I feel very strongly about this issue and really thankful for Police's proactive action on this. I sincerely hope that you will find merit in my suggestion.

Thanks and regards,
Nishant Kashyap

Sunday, December 14, 2014

Regulations, Rape and Uber - Let's get our facts right and let's ask the right questions!

I woke up last Sunday morning to the horrifying news of yet another rape in Delhi and what made the act even more dastardly was the fact that the incident happened in what was till then considered ultra safe Uber cab allegedly perpetrated by a Uber driver. And then all hell broke loose - news channel were running the story non-stop highlighting how Uber - 'a radio cab operator' has been flouting norms, calls to ban Uber started coming in,  Uber officials in Delhi were being summoned by Police and transport authorities, soon Delhi Govt banned Uber, Home ministry also issued an advisory to states government asking them to ban Uber and pretty soon Telangana and Maharashtra followed suit (and the current status in these states in unclear given the number of uturns), Uber Mumbai's GM was attacked inside a Govt office premises in front of police in full view of press and now Uber staff is working out of either hotels or home too worried about their safety. Of course, the Uber incident has also had a fallout for other similar operators viz. Ola and TaxiforSure who have come under fire in some of these cities. Amidst all this Uber hunting there was also a surprising and somewhat reassuring statement by Minister of Transport who asked the question if banning Uber would solve the real issue here?

While the situation has been rapidly evolving over the last 7 days ever since the story broke - I have been amazed to see how poorly informed our authorities and news channel have been about cab aggregators like Uber, Ola etc.For instance, Delhi Police wasn't even aware of what Uber is all about and one of the senior police officer actually had to download the app and hail a Uber cab in order to reach the Uber office - this despite the fact that Uber is a registered company providing cab service in the city and has been in news for all sorts of other reasons till this incident happened - the latest being RBI orders to get its payment system in compliance - clearly no one is Delhi Police bothers to read news unless they are a part of it! Moreover, given the fact that registering a business in India is toughest in the world - one would expect that at least this tough process makes it easier for authorities to track down the business in such situations - clearly that is not the case. Similarly, it was irritating to see leading news channel referring to Uber as a Radio cab operator for next 2-3 days and therefore, talking about its lack of compliance such as not having a call center etc without even realizing that none of that holds true for a cab aggregator and therefore, clearly misled their audience in believing that Uber and other similar players have been flouting radio taxi norms. It was really funny to see some of the so called traffic experts and former police officers appearing as guest on these channels already convinced about Uber's guilt and imparting wisdom - clearly nobody bothered to do their homework and definitely no one seemed to be asking the right questions.

As someone who has been watching this space closely, I am very disappointed with all the misinformation and therefore sharing some facts on regulations so that next time when people debate Uber at least they do it on the right basis. Also will try and give my two cents on this entire Uber saga.

Interestingly, last year in Mumbai, RTO filed a case against Ola (and also Meru Plus) for operating tourist taxis with a meter (more on why that would invite RTO's wrath later in this post)  - while what happened to that case is not clear but why did the authorities not wake up then to the potential problem an unregulated player can pose? Perhaps they were waiting for this incident to happen!!

Its not Uber, Its Delhi Stupid!
But I get into Uber stuff, as a Delhi boy, I have one question for the city - WHAT IS WRONG WITH YOU DELHI?

I happened to be in Delhi in 2012 Dec when the entire city was on boil in the aftermath of Nirbhaya gang rape case. The fact that the issue rocked the parliament with women MPs vowing that this case won't be just another statistic and the India Gate stand-off gave me hope that perhaps things will improve - perhaps the perpetrators will realize that rape is just not done knowing very well that next time they will have to pay a much bigger cost if they dare to commit the act. But no, my optimism was misplaced  - Delhi continues to be the rape capital of the world. At times I wonder who are these guys who can so easily commit such crimes without even thinking once about the consequences? For instance, what was this Uber driver thinking - that he won't get caught? Also what is it with Delhi rapist and iron rods - is there some Delhi School of Rape which we don't know about teaching lessons on preferred weapons for sexual assault? Interestingly, all those who are cursing Uber need to remember that Nirbhaya was raped in a Pvt Bus - bus which essentially operates on a stage carriage permit (a permit which allows pvt buses to operate as chartered buses picking up and dropping people along the route) and its driver and conductor were involved - people who are given license by the authorities. More importantly, the unfortunate girl was in that bus because the auto drivers outside the mall, who operate under the permit given by the Govt and are obligated by the law to ferry people, refused her a ride - in my opinion those auto drivers are as much responsible for her rape as that bus driver and conductor.

You may be wondering why I have jumped topics here? My limited point in highlighting these facts is to ask the authorities why wasn't anything done then to ensure that city transport is in safer hands - the auto drivers still blatantly refuse fare and often themselves indulge in eve-teasing (ask any Delhi female), was any drive carried out to check the antecedents of Delhi bus drivers and conductors, any review done of permits given to pvt buses and taxis then? If not, then you were essentially waiting for another disaster to happen and it has happened.  Why is it that for a woman to commute safely in the city she needs a cocoon like Uber and cannot rely on regular auto drivers or other modes of public transport to reach home safely and when that cocoon turns out to be nothing but a mirage all hell breaks loose? Perhaps if our city transport would have been in order may be this girl wouldn't have bothered with a Uber!

So, how much are Uber, Ola et al in the wrong?
Now lets come to issue at heart of this post. Are cab aggregators really working outside the law? To answer this one first need to understand the entire system of permits that govern taxis in India. Ever wondered why even though there is so much demand of black-yellow taxis/autos there are so few of them? The demand-supply of these taxis/autos is so lopsided that they don't mind refusing fares till they get a decently long distance fare leaving most of us ripping our hair out trying to reach our destinations. Why is that more people don't run these black-yellow taxis and take advantage of this unmet demand? That's because their supply is tightly controlled by authorities through a taxi permit. Only those guys who have a permit can ply these black-yellow taxis and do a curbside pick-up - no one else is authorized to do so. Of course, if you are operating under the permit there is a long list of rules that you need to follow for eg. charging fare using a meter which calculates as per the rates set by the authorities, always wearing a uniform, never refusing a fare - but most of us know what really happens. Now besides these taxi permit vehicles, there is another set of vehicles which can ferry people - these are vehicles who have tourist permit. Unlike black yellow taxis, these are the vehicles which are intended to provide at times intra but mostly inter city transportation for tourist and travelers. A tourist permit taxi cannot do curb side pick-ups and cannot have a meter - they need to have a pre-agreed contract for a point to point drop with a fixed fare. In addition to these two types of taxis we now have for last 8 years or so (at least in few big cities) radio taxis - the Merus of the world. These radio taxis are more like a hybrid between tourist and city taxis wherein they are primarily meant for intra city travel but cannot do curb side pick-up - you would need to ring a call center to get such a cab. Special licenses were given out to operate radio taxis across these cities where these licenses had some tough pre-conditions such as minimum 500 sized fleet within a year, 24x7 call center, GPS fitted vehicles, sufficient parking space etc. - In some ways radio taxis were the authorities' solution to the pathetic service being provided by black yellow taxis while ensuring that they do not rub the powerful taxi unions the wrong way - and of course the pricing was also set in a manner that they stay out of reach of the common man.

Now coming back to tourist taxis, there is a lot of ambiguity in regulations around usage of such taxis for intra city travel - for instance, I am sure before radio taxis came in, a lot of us must have called the nearest taxi stand to get a tourist taxi for a station or airport drop. Even now there are number of tourist taxi operators who provide these taxis for point to point drop within the city - all you need to do is call them and fix the rates. In fact, there are number of organized operators like Avis, Orix who have a fleet of tourist vehicles providing corporates intra-city logistics solutions for their people.You will be surprised to know that in a city like Mumbai where there about 48K black yellow taxis there are another ~45K tourist permit taxis. Imagine if these were also available to us as easily as city taxis - the supply demand skew would immediately get balanced and that is where the players like, Uber, Ola and Taxiforsure (and even Meru Plus) come in. Since these taxis cannot do a curb side pick and therefore cannot be on the road waiting for a passenger - how will they get info they you need a taxi? Either you call them (and then you will end up calling 3-4 of them before you get an available taxi at the right fare at the right time) which then is no longer as instantaneous as curb side pick-up or have someone like these cab aggregators aggregate this supply, fix a price and then act as a go between you and these operators to ensure that these cabs are available as instantly as city taxis - and that's how these guys are solving a major urban transport problem by providing a technology platform .

Now while the tourist permit taxis and their drivers are duly covered under the MV act and rules of country, these technology providers fall in a grey area as they neither own taxis nor they themselves are providing this service - at best they are acting like agents who are helping you get a ride. Therefore, there is no section in MV act under which they can be held accountable - though interestingly some of the states' MV rules like Maharashtra have rules around agents requiring them to get registered but again those rules refer to a person acting as agent and nothing really covers an entity or company working as an agent.Therefore, as long as these cab aggregators are aggregating cabs which have a permit they are not doing anything illegal - they are just providing information to commuters and getting their commission. In fact, it is really sad to see that here we have a bunch of new age companies with amazingly empowering technology platforms solving an age old urban transport issue coming under fire from those in the power echelons, who have otherwise had accepted status quo as part of their lives, working at the possible behest of those unions and vested interest who now see their grip loosening over the urban transportation scene.

Having said that since these aggregators are almost working as pseudo operators setting fares and terms and conditions of operations - I think it is critical that they are brought under the ambit of MV act with the new bill that is due to be presented in the parliament soon - so that they can be regulated more easily and do not get away by dealing with customer in a high handed manner.

What about aggregators' accountability?
Now that we have some clarity on regulations what about the question of accountability? Surely these aggregators who are venture backed incorporated companies run by well educated enterprising individuals have to be more responsible then some fly by night operators who typically take people for a ride by promising a chauffeur driven sedan and delivering a rickety private car driven by a ruffian who looks all set to murder you at the slightest provocation! If they want to build a sustainable business in such a highly competitive environment they better be accountable. But the question is where do we draw a line on accountability? I am not sure if you noted that throughout the coverage of Uber rape case there has been no mention of the taxi owner - the actual permit owner who is answerable under the law. How did he employ this driver? What checks did he do before employing the driver? More importantly, what checks are prescribed under the law before hiring a taxi driver by a permit holder? And what provisions are there in the law to qualify license of a taxi driver once convicted under the law? Now definitely these aggregators need to make sure that they do not end up with cab which is not fit for plying (including making sure it has requisite permits, permissions etc.) and a driver who has behavioral issues or a chequered past (besides checking on his health, license etc.). But while you can get a cab tested by a well qualified mechanic and give courtesy training to the driver how do you check the driver's antecedents especially when he is hell bent on hiding it? Do we have access to some kind of criminal database to cross check what a driver states in his application? Or does police provide some kind of verification service which can help such companies? The answer is big NO!(In fact, when I wanted to hire a driver for my car and checked with police on their verification process I was told there was none and advised to just keep a copy of his ID documents - now how would that help curb his criminal intention if he has any?) Even if these companies hire a verification agency the only way they can access such information is by tracking the driver's history all the way back to his place of origin and to the time when he started working -something which firms don't even do for their own direct employees these days. But the bigger question is why should the aggregators facing stiff competition in the market and keen to quickly ramp even worry about the employee of their contractual partner - the cab permit holder - why isn't this the responsibility of the permit holder? And why should this be done only in the case of cabs contracted with aggregators? What about those cabs which operate independently as tourist taxis - don't they also need to be made safe as well? In another incident few months ago a taxi driver and his friends in Dehradun raped and murdered a girl and her male friend who were traveling from Gurgaon  - so much for a safe journey in a tourist taxi - why hasn't this incident prompted the same kind of media scrutiny and authorities' attention and action? What about those numerous cases where drivers including some city taxi drivers blatantly intimidate and abuse passengers? What are we waiting for - a murder? The big question is what are authorities doing to identify such elements and remove them from the system - how do they even get license to drive public service vehicles? Why should suddenly the onus for such checks falls on an entrepreneur who has worked his ass off on developing a tool under the big assumption that if govt has issued permit and licenses then those taxis and drivers must be clean and trustworthy? Also, to all those pointing fingers on these cab aggregators - I want to know what is the expectation here? That they would somehow manufacture courteous civilized free of criminal record drivers ? Remember their service offering is only as good as the people and resources who are already in the system - they can only marginally improve them through training but cannot completely change them - they definitely cannot identify and eliminate a criminal element in a preemptive manner especially in absence of any resource to carry out such checks - the quality of people and resources is something which law makers need to address.

Of course, while arguing this one cannot miss the news that has emerged where the same driver was already reported by another passenger to Uber and Uber did not take action - this definitely qualifies as a breach of trust and deliberate act of omission thereby putting their guest at risk. While Uber and other aggregators cannot preemptively identify drivers who may have criminal intent - one would expect them to take immediate action on such feedbacks. Uber must own up to this lapse and if doesn't, it should be held liable. This is another reason why this new animal called 'cab aggregator' needs to be quickly brought under the ambit of law.

Here's hoping that all knee jerking post this very unfortunate event subsides soon - yes we need new regulations for new kind of service providers but we also need to clean our own mess - do not let the Police and RTO pass the buck to cab aggregators for that will just be playing in the hands of those who do not want to see them succeed and may lead to untimely death of what otherwsie can be a great solution to our urban transportation woes.

Tuesday, June 17, 2014

Crash course in leadership (Courtesy: Star Trek)

While watching a re-run of Star Trek Into Darkness on TV yesterday, I was particularly struck by a 2 min sequence that in my opinion so eloquently encapsulates all the essential elements of leadership.Perhaps if all people managers were made to watch this clip every work morning there won't be any need for organizations to spend thousands of dollar on leadership training!!

This brief 2.4 minute video packs a number of leadership lessons viz.
  1. Delegate - Kirk doesn't even blink before handing over the charge of the Enterprise to Mr. Sulu 
  2. Trust - Kirk not only hands over the Enterprise to Sulu but also trusts his abilities enough to authorize him to deal directly with Harrison
  3. Coach - Kirk doesn't leave Sulu to fend for himself, he also coaches him on what needs to be done and guides him when it needs to be done (while on his way to Kronos)
  4. Inspire confidence - When Sulu looks a bit diffident about taking charge, Kirk explicitly expresses confidence in his abilities making Sulu believe that he can command the Starship
  5. Back your people - When Dr. McCoy raises doubt about Sulu's ability, Kirk is quick to quell all doubts ensuring Sulu gets all the required support from the Starship leadership (in this case McCoy)
  6. Be the Guru - There was no way Sulu would have performed so marvelously had he had not seen Kirk doing it so many times. Sulu knew the drill (the tone, the verbiage and the manner) well to deliver it to perfection all because he got trained by watching Kirk in action. This is the most important lesson in leadership - Leaders need to deliver results multiple times (so that their team can learn and also to set benchmarks) before they start expecting the same result from them.
More than Sulu, Kirk deserves a full ten-on-ten for Sulu's remarkable leadership here!!

Sunday, May 18, 2014

GE 2014: AAP's Delhi Debacle - How bad is it really?

One of the big disappointments in the General Elections 2014 was AAP's so-called debacle in Delhi. Having delivered a stellar performance in the recently concluded Assembly Polls (AE 2013), where it uprooted the 15 years old congress government and emerged as the second largest party within a few seats range of a majority - its inability to open account in GE 2014 (in Delhi) has left AAP supporters disappointed and from the news it seems AAP party workers bewildered and badly shaken (their demand from AAP leadership to again form Govt in Delhi without seeking a fresh mandate reeks of desperation and a sense of helplessness). So these developments left me wondering how bad is the drubbing really in Delhi for AAP? Would they had fared better had General Elections been held in Dec 2013 when supposedly AAP had a much better public perception? What really has been the impact of AAP's sudden decision to resign? Of course we all know that AAP's vote share has actually improved (though marginally from 29% to 33%) from last election but still a duck makes one wonder what went wrong? To me the funny thing is that when we talk about AAP's amazing Debut in Dec 2013, we all seem to forget that BJP was still the single largest party in Delhi - its almost as if BJP's performance has no memory share! Such was the impact of AAP's performance that perhaps it got stamped in our minds as a much bigger victory than it really was. So to understand this better, I decided to do a little number crunching - I took the AE 2013 numbers (by assembly constituencies - AC) and rolled it up by corresponding parliamentary constituencies (PC) to examine how AAP would have fared had general election been held in Dec? Would it have done better? Simply put the answer is yes.

If you look at AAP's vote share rolled up to PC level based on AE 2013 - AAP would have won 2 seats Chandni Chowk and New Delhi though BJP would have still come on tops in all the other seats. More importantly, when one looks closely at these numbers, one has to appreciate that BJP would have won with comfortable margins ranging from 4% to 11% while AAP would have won with a slender margin of 1% in Chandni Chowk and only in New Delhi it would have commanded a margin of 5%. Also, if you examine this New Delhi PC closely, this 5% margin is largely attributable to Arvind Kejriwal's stupendous 25.8K votes win over Sheila Dikshit and if you were to remove the New Delhi assembly constituency votes (assuming that AK would have been battling Modi in Varanasi) then the victory margin drops to 2%. Net net a victory by a whisker. So perhaps AAP's tally would have been better but nothing spectacular. 

Now comes the bigger question, did AAP's sudden exit in Delhi erode voter confidence and is the drubbing a result of that. A look at the vote share change data at PC level provides some insights into that.

We all know that AAP's vote share at an overall level has improved marginally in this election (from 29% to 33%) but interestingly, that improvement seems to be well spread out (rather than being concentrated on a single seat which then would have been attributed to that particular candidate), this points to that the fact that AAP is still widely perceived as a highly acceptable alternative. Importantly, the improvement in vote share ranges from 4% to 13% while the drop ranges from 1% to 3% except in New Delhi where it dropped by 8% (perhaps people punishing AK for abandoning the seat?). So my key take away is against the widely held perception that AAP has been punished by Delhi voter for a sudden exit, they seem to be very much there where they were in Dec'13 -perhaps this vote share would have been much better had AAP stayed in Govt? Who knows? But yes the damage doesn't seem to be as bad as we think it to be. As an aside, it would have been interesting to break this GE 2014 data by ACs to see how many seats AAP would have won had Assembly polls had been done simultaneously - however, that data is not available publicly, I am sure AAP and others must already be doing that maths (in fact, according to a news report BJP was on top in 60 out of 70 seats - so perhaps AAP would have been decimated!!).

So if voter didn't really punish AAP, then what went wrong? The answer is simple - Modi wave and the fact that most of the voters in Delhi had already decided that for Assembly it's Kejriwal and for Lok sabha it's goona be Modi. BTW AAP is not the only party which has been annihilated (actually annihilated is a wrong term in the context of AAP for there was nothing there to destroy but I am trying to be a lil dramtic!) by this unprecedented election results. Given that parties like BSP, left, SP, MNS, JD (U), RJDs which had their fixed strategic voter bases have lost so badly - I don't think AAP has done badly at all - they just couldn't make it to the podium. And the impact of this wave and voter mindset is evident when one looks at change in vote share for BJP (which has come mostly at the cost of Congress and not AAP btw)

 So to conclude, in my view -
  • AAP still needs to do a lot more work before it can stake a serious claim on a Delhi Lok Sabha seat - it definitely would not have been an easy win in Dec'13 either (except in case of AK)
  • Delhi has not punished AAP for a sudden exit - however, if the current trend holds AAP may still suffer in Delhi assembly polls more due to after effects of a Modi wave than anything else - so AAP needs to get its act together fast to retain Delhi.
  • A zero in Delhi was not AAP's doing but simply the effect of Modi wave, for a young party (which also has been the favorite whipping boy of other parties and media ) to still withstand such a massive vote shift is an achievement and you should be patting yourself on the back rather than being pensive about it
  • A drop in New Delhi vote share shows the importance of AK for a Delhi win - AK you need a home base what better than New Delhi as your constituency?

Tuesday, May 13, 2014

Indian Credit Card Market - A snap shot

While trawling through the RBI website for a totally different purpose I landed on some very interesting credit card data. Since I started my career in the cards industry - I could not resist running a quick analysis to understand how the industry is faring and got some interesting insights. Check it out!! (Disclaimer - Pls note that this is only based on one month of RBI data - Jan'14 so there might be gaps due to reporting issues etc.)

Cards in Force

As on 31st Jan 2014, there are 18.9 Mn cards in force with top 10 issuers contributing a mammoth 94% of the cards in force. While cards issued or in force by itself is not a good determinant of market share (which should be based on spend or active cards - unfortunately, data on active cards is not available with RBI though one can make some deductions based on the spend data) it definitely does highlight who are the aggressive issuers in the market (as to how they are performing is another issue which I have tried exploring in next section). And as expected the private Indian banks viz. HDFC and ICICI come on top closely followed by SBI - together these 3 banks account for ~58% of the total cards issued.

India's tally of 18.9 Mn cards pales when compared to China's ~331 Mn cards (reported as on end of 2012 Source: Bloomberg) and US' ~536 Mn (Source: Bloomberg) though some source also place US' cards in use to about 1.5 Bn (making it a whopping 3.5 cards per person). A look at RBI data shows that the number of cards issued has remained almost stagnant around 19 Mn mark - in fact it has fallen from about 19.6 Mn to current levels driven largely by HDFC's card base shrinkage between May to Aug last year (check out the story here -Business Standard's Story on HDFC's card portfolio shrinkage). Clearly Indian Bank's aggressive card sales followed by a heavy losses on that unsecured lending has dampened the spirits but this is also a pointer to the potential this market has to offer as it is clearly far far away from a saturation point. Just the debit card base of these issuers is 175 Mn (excluding Amex which is just a credit card company) and if we also exclude SBI then it stands at around 58 Mn - clearly some of them would be credit worthy!

Card Spend

For the month of Jan' 2014, the total spending on the card stood at Rs. 141.62 Bn (or assuming a USD:INR rate to be 60 ~USD 2.36 Bn). Given that this figure would include holiday spending, caution needs to be exercised before extrapolating this number for the entire year - for instance the spending in Dec'13 was around ~13.5K Cr while in Feb'14 it was 12.7K Cr. However, what we are more interested in is how this spending is split between different players. Once again this number might be slightly skewed due to seasonal offers - but would still give a good idea of how these players fare on driving spend.  A quick look at the charts reveal that while HDFC - the topmost issuer of cards also tops the spend volumes, the MNC banks Citi and Amex are 2nd and 3rd  even though they account for 13% and 3% of the cards issued respectively (once again since this is only based on Jan data - pls refrain from drawing a long term conclusion on this basis though interestingly the Feb data also shows a similar trend). ICICI the second biggest card issuer is at 4th position in terms of spend followed by SBI and Axis. They are then followed by MNC banks Stan Chart and HSBC. The numbers which stick out are ICICI and SBI who inspite of having 17% and 15% of the card issued have a spend share of 12% and 11% respectively and have been displaced by Citi and Amex with a spend share of 17% and 12% respectively. A part of this can be explained by inactive card base of these banks ie. ICICI and SBI which then also demonstrates that enough is not being done by them to get those cards activated - if you consider them worthy enough to have cards then you must make an effort to get them to spend on those cards - unfortunately that aspect can not be explored here due to lack of data. In addition, the premium customer base of Citi and Amex as compared to ICICI and SBI is another reason how this difference can be explained. However, while for SBI given that it is a aam junta bank, this difference is understandable, if I was a ICICI shareholder or part of the management team - there would have been some tough questions asked especially in light of HDFC's stellar performance - their card base should be pretty similar - in fact, given HDFC's bigger base one would expect the problem of inactivation and non-premium customers there to be higher but they seem to have successfully navigated the same. Similarly for MNC banks HSBC and Stanchart, while given their card base and spend, they don't seem to be doing too badly, a comparison with Citi and Amex - where again the customer base would be very similar points to a big room for improvement for these banks.

Now the spend share for any card player is driven by card activation and spend volume on the active card. While due to lack of data we cannot explore the former, we can definitely look at latter to understand a high level spend behavior ie. how much on avg their card members are spending which in turn is a function of  how many times do they transact in a month and how much do they spend on each transaction. These metrics should provide some insights on the card base of these banks as well as the effort they might be putting in incentivizing spend. The following chart on avg spend per card (pls note that this or any of the following metric does not exclude inactive cards) reiterates what we have seen so far where Amex with a small card base and high spend is at top (and way beyond the reach of others) at Rs. 26.8 K per card followed by Citi and HDFC at Rs. 9.8K and Rs. 8.1 K respectively. Not surprisingly, ICICI and SBI are the bottom two with an avg spend of ~Rs. 5.3K respectively (all data is for the month of Jan only). Perhaps for SBI and ICICI, this number may go up dramatically if we were to remove inactive cards (and may be they should consider a purge similar to that done by HDFC in the middle of last year - mentioned earlier in this blog prior to which HDFC's per card was also around Rs. 5.6K). Readers might be wondering why should banks be bothered about inactive cards as long as the credit card business is profitable and that perhaps this entire analysis should be done on active card base only to do a better comparison. While I cannot agree more with using active card base for this analysis (with proportion of inactive cards serving as another metric), I think inactive card base is an important reflection on the bank's ability to manage its portfolio. Even if the portfolio is profitable, inactive cards would be a drag on this profitability due to maintenance cost. More importantly, if these banks are not taking a stock of the situation and taking remedial measures (in how they market and underwrite), they might just keep adding more inactive cards to this portfolio which basically means that they are wasting their marketing and underwriting resources.

Transactions per card

As mentioned earlier, one of the key spend driver is how many times does a bank gets its customers to transact on the card. Banks have been working overtime to get their customers to move their cash and other forms of spending on cards. While traditionally credit cards have been used for entertainment and shopping, banks are now trying to capture payments such as bill payments and grocery spends - a recurring monthly spend with assured charge volume. To get such spends a number of incentives have been lined up such as cash back offers, discounts, loyalty rewards and of course, promotions (such as win a movie ticket if you spend on grocery or additional reward points if you transact X times in a month). Therefore, a comparison of transaction per card is a good measure of the effectiveness of these incentive programs especially since all of them would be competing for an increased share of the same wallet in most of the cases (all of us hold cards from more than one bank but would prefer to spend using those which give us better incentive) . And when one looks at the comparison - not surprisingly Citi comes on top followed by HDFC and Amex while other are in a similar bracket of 2.1 to 1.9 transaction per month (except Kotak) - the same trend has been observed in other months as well. Citi clearly seems to have got its act together with promotions like Citi discount on food and products like premier miles (where you can convert loyalty point to but any airline ticket) is clearly helping them drive transactions. While the transaction per card may be a bit higher for the month of Jan due to festive season - it still clearly sets a minimum threshold of 2.5 and an aspiration band of 2.5 to 3 transaction per card for other banks to strive for.

Spend per transaction

While transaction per card is largely a function of incentives one has to offer, spend per transaction is driven largely by the kind of customer base a bank has and then to an extent by the kind of incentives it has to offer. For instance, an option to convert big ticket purchases to EMI or promotions like win an ipad if you spend more than Rs. X thousand may prompt one to move a big ticket purchase to that card  (if being planned), but typically this would give a spurt only during certain months such as diwali etc. (when such promotions are floated and may increase the spend per transaction) whereas a round the year high spend per transaction is driven more by lifestyle choices which in turn is driven by the economic strata the customer comes from. This in turn means that banks need to pay attention to their marketing strategies by targeting the right customer segment and by developing the right products - but only if they prefer quality over quantity - something which will allow them to capture a lot bigger share of the credit card spend without having the need to have an expanded base as in the case of Amex. This may also help these banks optimize their marketing cost and cost of maintaining a much smaller base - though it may get offset by a premium service that they may have to offer (perhaps a topic for next blog?). Clearly, Amex's high spend share comes from it leading the charts with Rs. 9.6 K per transaction which is about 2.6 times the next best bank - IndusInd (a surprise entry) at Rs. 3.6 K per transaction. While it is not surprising that Amex comes on top having already seen the spend per card data, the difference between Amex and others is a bit surprising especially since it also comes in top 3 in terms of transaction per card. This piece of analysis also throws up some more surprises with Amex followed by IndusInd, Axis, Kotak and Stanc which can be taken as an indicator of the quality of their customer base while Citi and HDFC are 3rd and 4th from the bottom respectively. For players such as IndusInd, Axis, Kotak and Stanc this might throw up an interesting insight where besides focusing on expanding their card base (which they should anyways do given the penetration levels and hence the opportunity we saw earlier) they should maintain and further improve on the quality of the customer base. Interestingly for IndusInd, Kotak and Axis (the bottom 3 banks when it comes to transaction per cards), this also means that by focusing on improving transaction per card for their current base may also give them great dividends - they are already sitting on a gold mine and just need to start digging more. Coming back to Amex, what really intrigues me is the level of spend per transaction that Amex is able to extract especially since an Amex card holder would invariably be a customer of one of these banks and definitely be holding a credit card from one of these other top 10 players - what is it that Amex is able to offer which these banks can't to be able to drive such high spending? Another explanation could be Amex's corporate card program where a lot of big ticket travel spend might be coming on the cards but then other banks also have similar programs and in fact, given that they have other banking relationships with corporates as well (which Amex cannot have), they are in a much better position to leverage their relationship and capture this spend. Clearly something is amiss here either Amex's offering is truly unique or banks are just oblivious of this opportunity.


While this entire analysis has focused on spend, we have completely ignored the other big revenue driver for the credit card business namely the interest income from revolving credit. It is quite likely that banks showing up as laggards here viz. ICICI and SBI might come on top if we look at revolve volumes and income thereof. However, in my view, a credit card business should look at merchant discount coming from spend as its main revenue driver with revolve income only as icing on the cake - in fact, if my revolve incomes starts going up - I would be very worried about the quality of credit given the unsecured nature of lending. Once again my interpretation here are based on one month data so one needs to be careful before generalizing but some points do stick out -

  • With a card base of only 18.9 Mn - there is a lot of potential that this market still holds for issuers
  • HDFC, Citi and Amex seem to be ruling the market driven by primarily by large card base in case of HDFC, high transactions per card in case of Citi and high spend per trasnactions in case of Amex
  • ICICI and SBI seem to be laggards might be due to their large inactive card base and can take a cue from HDFC and can make their base leaner and more productive
  • The smaller Indian players in this segment within top 10 viz. IndusInd, Kotak and Axis seems to have a great customer base - just get them to take the card out more often!
  • Stanc and HSBC - you guys are stuck in middle - think on what can you do differently to play catch up with big brother Citi!

Friday, January 17, 2014

Misinformation and Misselling in the name of IRDA by insurance companies

Was trying to buy a health insurance when the rep tried taking me for a ride in the name of IRDA - thankfully since I record all my phone conversations, I could report to IRDA (along with a cc to the insurance company). Will keep you posted if I hear anything.....


I am writing today to bring to your attention a case of gross misinformation and misselling in the name of IRDA which I came across yesterday and may point to a bigger problem on how insurance companies might be conducting themselves while selling products and settling claims. 

I was trying to purchase an individual health insurance product online on ApolloMunich website when I was forced to call them - as the insurance cover which I wanted to buy was not available online. This conversation happened on 15th Jan at around 11:21 am and left a very bad taste in my mouth, for it was a clear attempt to dupe me into buying a joint cover for me and my wife when I was looking to buy an individual cover for myself - and that too by quoting a fictional IRDA rule!! I have recorded this phone conversation (as a practice I record all my phone conversations and  had informed the ApolloMunich rep that I am recording this conversation) and sending it across for your listening pleasure - its about 13 min conversation with long pauses (when I was put on hold while rep consulted his manager) - you can listen to this conversation using a VLC player (its a .amr format). I would request you to listen to this recording till the end where the rep does a remarkable volte-face. 

To give you a gist of what happened, after taking my basic information and realizing that I am married, the rep informed me that as per IRDA rule, since I am married I cannot buy a standalone product but have to buy a cover for both myself and my wife (of course that means additional premium for the insurer). Very surprised by this information, when I confronted the rep, he consulted his manager and  came back saying that I can buy a standalone product provided I give an undertaking that my wife is already covered under another insurance product and hence, I would not be buying for her (since I had already told him that her employer provides health insurance) . Appalled at his audacity when I demanded to know the IRDA rule under which such condition was being imposed he initially refused to share information but when I threatened to file complaint with IRDA  and also demanded that I be connected to his manager (which did not happen - as per the rep, the manager was unable to come on phone) he finally relented that there is no such IRDA rule. 

While this may seem like a minor incident and perhaps a case of zealous hard-selling by a sales guy, I view this very seriously simply because IRDA's name was being thrown around so callously. When any insurance company quotes IRDA, a potential customer or a policyholder will take it as a given and not question the information being given and my worry is that companies may be taking undue advantage of this (as the recording shows). My bigger worry is if such misinformation is also being perpetrated at the time of claim settlement -thereby denying claimants of their rightful claims, for after this conversation my trust in insurance companies has been badly shaken.  

I am not sure if what happened with me was a case of a zealous rep trying to achieve his targets or an obsessive floor manager pushing his people hard or perhaps even a bigger wider problem. I am also not sure if this is a frequent problem faced by others - perhaps you would have better data points on that but clearly this incident shows how IRDA's good name can be misused and I hope that the regulator would take note of this and ensure some steps are taken to arrest such a malpractice (if it indeed is a wider problem). 

My apologies for spamming your mailboxes but this was something which I had to bring to your notice. 

Nishant Kashyap


Finally after two reminders and 23 days I get a highly bureaucratic response from IRDA...

Dear Sir/ Madam,
We acknowledge your mail.
As we found information to be incomplete to register your complaint, we request you to send
the complete details in the below mentioned format or you can contact 155255 (Toll Free) to
register the complaint.

Mandatory Fields

*Name of Complainant

Communication Details

*Door No./ Bldg/Name/ Floor

Street / Area





*Pin Code

E- Mail

Telephone No

*Mobile No

Fax No

*Insurance Type (Please mentioned Insurance Type  


* Non Life

*Insurance Company Name

*Date of Birth of Policy Holder

*Policy No:

Cover Note:

Other Reference No:

Policy serving Brach Code/Address

*Details of the Complaint (Please type the full details of the complaint)

*Have you Approached Insurance Company Regarding This Grievance (If Yes Provide Ref No )

Consumer Affairs Department

"Caution against spurious calls and fictitious offers - IRDA does not involve, directly or through any 
representative, in sale of any kind of insurance or financial products. IRDA does not announce any 
bonus for policyholders or insurers. Any person making any kind of transaction with such 
individuals/agents will be doing the same at his / her own risk."

"This mail may contain confidential or proprietary information intended only for the use of the addressee(s) named above or may contain information that is legally privileged. If you are not the intended addressee, or the person responsible for delivering it to the intended addressee, you are hereby notified that reading, disseminating, distributing or copying this mail is strictly prohibited. If you have received this mail by mistake, please immediately notify us by replying to the mail and delete the original mail and any copies immediately thereafter.’Caution: “The Insurance Regulatory & Development Authority is the Regulator for the insurance sector and does not carry out any prospecting or sales. Please do not respond to such offers however official or attractive they may look. These are spurious offers/calls. 


My response below (BTW ppl as far as insurance is concerned you are on your own..I expected IRDA to be incensed and quick to take action...but I was very disappointed with their total lack of interest)


When I had sent my initial email to IRDA along with the call recording, I was seething with anger on a blatant attempt by a reputed insurance company to dupe a customer and that too by misquoting the regulator (ie IRDA). More importantly, I was pretty sure that when the regulator (ie you) will hear the content of the call - which by the way is indisputable as the rep gives his name and ID very clearly and the audio quality is also very clear - you would be much more angrier and there would be immediate action as this is a clear case of attempted fraud and misrepresentation. I was hoping that IRDA would take immediate cognizance of the issue - which I firmly believe is much more wide-spread than the current company in question and would  ensure that companies stop taking its customers for a ride in this manner. However, I must say that I am very disappointed by your lukewarm response. First of all there is no acknowledgement of whether you had received my email or not - when this was something I expected you to immediate clamp down on. Then after I send two reminders, all I get back from you (and that too after 23 days) is that I have not filed my complaint in the provided format??? I have very clearly communicated in my first email that I wanted to get your attention to a bigger problem which is much more than just a grievance on a specific issue with a specific company - it is a wider problem where IRDA name is being misused by companies and fraudsters alike and it is painful to see that rather than taking strict and prompt action - all we are worried about is the red tape - whether the complaint was filed in the right format or not? Kindly look at the form that you had sent out - how is this even relevant to my complaint - this form is for policyholders while I faced an issue during the purchase of the policy.  As an educated law abiding citizen who trusts his authorities to do the right thing, I sought to bring to your attention a malaise but honestly your slow and indifferent response has shaken my trust to the core. No wonder, insurance companies and fraudsters think they can do anything and get away with it! Insurance is one of the basic needs of modern living which has been long ignored in developing countries like ours - while it is heartening to see so much of action thanks to IRDA in recent years - pls understand that if you let these rogues get away - it will only create mistrust among consumers which in the long term would severally impact the growth of the sector - pls do not let this happen. BTW I have another call recording which I got from someone claiming to be from IRDA verification department - I wanted to share that as well - but seeing your tepid response I am not any longer sure that bringing such issues to your attention is worth it!

A very disappointed citizen,
Nishant Kashyap