Bank of Baroda Aims for 1 Million Prepaid Cards, Seeks Outsourced Management

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AuthorAarav Shah|Published at:
Bank of Baroda Aims for 1 Million Prepaid Cards, Seeks Outsourced Management
Overview

Bank of Baroda is targeting a significant expansion of its prepaid card base, aiming to reach one million cards within five years. The public sector lender, currently holding 454,608 cards, plans to issue 100,000 new cards annually. It is actively seeking an external agency to manage its prepaid card operations end-to-end, encompassing domestic, foreign currency, and common mobility cards, along with rewards and cashback processing. Bank of Baroda's active card rate stands at a robust 25%, outperforming the industry average.

Bank of Baroda Expands Prepaid Card Ambitions

Bank of Baroda, India's second-largest public sector lender, has set an ambitious goal to more than double its prepaid card base, targeting one million cards within the next five years. As of November, the bank had 454,608 prepaid cards in circulation. The strategy involves issuing approximately 100,000 new domestic and foreign currency prepaid cards each year, according to a document detailing the lender's plans.

Seeking External Partnership

To achieve this growth, the state-run bank is initiating a request for proposal (RFP) to onboard an external agency. This partner will be responsible for providing an end-to-end prepaid card management module. The scope includes issuing rupee prepaid cards, foreign currency cards (single or multi-currency with at least 12 wallets), and national common mobility cards. Processing rewards and cashback programs is also part of the service agreement.

Performance Incentives and Penalties

The agreement with the chosen service provider will feature a clear structure of incentives and penalties. The bank will offer a 20% bonus, above base compensation, if the provider surpasses the annual target. This is contingent on customers making their first transaction within 60 days of issuance and spending a minimum of ₹50,000. Conversely, failure to meet quarterly distribution targets will result in a penalty equivalent to 25% of the compensation. The bank also reserved the right to claw back funds if applications are found fraudulent or if cards are cancelled within 180 days without any transactions.

Navigating the UPI Dominance

While India's Unified Payments Interface (UPI) has revolutionized digital transactions, experts suggest prepaid payment instruments (PPIs) still hold relevance. In November, PPIs facilitated 899.1 million transactions, a fraction compared to UPI's 20.5 billion. However, specific use cases like forex cards are expected to see demand, driven by a surge in Indians travelling abroad. Over 30.9 million Indians travelled overseas in 2024, a 10.8% increase from the previous year. Mass transit systems also present a growing opportunity for contactless prepaid card usage, according to fintech consultant Parijat Garg. While UPI has impacted wallet popularity, instruments like FASTag and gift cards remain vital.

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