For Indian Bank's credit card offerings, how should we weigh increasing reward points to drive usage against potential revenue loss from higher redemption rates?

Introduction

The trade-off we're examining today is how to balance increasing reward points for Indian Bank's credit card offerings to drive usage against the potential revenue loss from higher redemption rates. This scenario involves weighing short-term user engagement against long-term financial sustainability. I'll approach this analysis by first clarifying key aspects, then diving into the product details, metrics, and experimentation strategy before providing a final recommendation.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about the current market position of Indian Bank's credit cards. Could you share how our card offerings compare to major competitors in terms of reward structures?

Why it matters: Helps understand our competitive advantage and potential for differentiation Expected answer: Middle-of-the-pack rewards, room for improvement Impact on approach: Would influence how aggressive we need to be with reward increases

• Business Context: Based on our revenue model, I assume a significant portion comes from interchange fees. Is this correct, and how much do we currently spend on rewards as a percentage of revenue?

Why it matters: Establishes the financial context for the trade-off decision Expected answer: 70% from interchange, 30% from interest; rewards at 1.5% of revenue Impact on approach: Would help determine the acceptable range for increased reward costs

• User Impact: I'm curious about our user segments. What percentage of our cardholders are power users who frequently redeem points versus occasional users?

Why it matters: Identifies which user groups might be most affected by changes Expected answer: 20% power users, 80% occasional users Impact on approach: Would guide targeting strategies and help predict redemption rate changes

• Technical: Considering potential changes, how flexible is our current rewards management system? Can it easily accommodate new point structures or redemption options?

Why it matters: Assesses technical feasibility of implementing changes Expected answer: Moderately flexible, major changes require 3-6 months lead time Impact on approach: Would influence the complexity and timeline of proposed solutions

• Timeline: Given the competitive landscape, how urgent is this decision? Are we looking at implementing changes this quarter or is this a longer-term strategic move?

Why it matters: Helps prioritize this initiative against other product roadmap items Expected answer: Aim to roll out changes within 6 months Impact on approach: Would determine the depth of analysis and experimentation possible