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The largest migration of credit-card users in the history of Indian financial services is underway. Over the last two months, Citibank India cardholders have been getting emails looking for consent: to move to Axis Bank.

This is Citi’s first step to transfer its 2.5 million users as part of a landmark deal, in which Axis Bank said it would buy the former’s consumer business for US$1.6 billion in cash.

The deal—struck in March and approved by the Competition Commission of India in July—will see Citi transfer its assets like credit cards, wealth management, deposits, and loan businesses worth Rs 27,000 crore (US$3.4 billion) to Axis Bank.

Naturally, Citi is doubling down on both retention and acquisition of users. “We are noticing an increase in spending for offers from Citi,” said a senior fintech executive who works with these banks. “Normally, Citi’s expenditure would be 2X of other banks, but now that is 3-4X of what it normally spends.” He requested not to be named as his company works with these banks.

The sale to Axis Bank is part of Citi’s wider exit exit Times of India Citigroup to exit 13 global consumer banking markets Read more from 13 countries. Axis had outbid Kotak Mahindra Bank—another bank with aggressive credit-card growth ambitions–for this deal.

For Axis in India, this was an “opportunity of a lifetime,” as chief executive (CEO) Amitabh Chaudhry claimed in a call with analysts in March.

Citi’s India business is expected to boost Axis, which has been floundering on a few fronts. The bank’s presence is not strong among credit-card users in the top eight metro cities. It is lacklustre even among salary account holders.

But, more importantly, Axis wants to use Citi’s user base to break into the top rung of India’s credit-card issuers. It is already the fastest growing credit-card issuer—adding ~200,000 cards a month in July. But with nearly 10 million credit cards in its kitty, Axis is still a distant fourth after HDFC Bank, SBI Card, and ICICI Bank.

“With this deal, Axis Bank wants to eventually be among the top three card issuers in the long term, but to begin with, it needs to close the gap as a fourth player,” said a former Citi executive.

It will take two financial years to complete the migration of cardholders. First, the legal merger is expected to close by March 2023. Then the two banking systems will need to be integrated. This will follow Axis Bank issuing its brand of cards to replace the Citi cards, said the former Citi official.

Axis Bank told analysts that it will entirely stop using Citi’s services only by September 2024. Meanwhile, the stakes are high for both parties.

Axis’ aspirations ride on Citi’s ability to retain its credit-card users and pass on the portfolio during the integration phase.

AUTHOR

Arundhati Ramanathan

Arundhati is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She writes the newsletter Ka-Ching! every Monday. She lives in Bengaluru and has spent over 12 years reporting and writing on various subjects.

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