From

Indian Overseas Bank Ref.No: ITEC / 38 / 2013 - 14

Central Office Date: 01.11.2013
763, Anna Salai
Chennai – 600 002 Issuing Dept: Transaction Banking Department
CIRCULAR TO ALL BRANCHES/REGIONAL OFFICES /OTHER OFFICES

Cashback Campaign for use of IOB Visa Debit and Credit cards
Campaign period – 15th Oct 2013 to 31st Mar 2014

Preamble:
Our Bank has more than 4 million Visa debit cards with approximately 80,000
cards being added every month. Currently, only 4.8% of these cards are used for
purchase transaction. The biggest challenge in driving activation is the deeply
entrenched cash habit coupled with the perception that it is an ATM card. ATM
transactions to Purchase transactions are 11:1 (approx).

In our constant endeavor to drive customer convenience and increase

revenues, we would like to increase our focus on improving the purchase
activation rates. Debit cards are not just essential revenue drivers for the bank,
but also work as differentiators for the core business of liabilities. By combining
convenience with control and security, our Visa debit products enhance the
value proposition of the deposit accounts.

In a face-to-face or a card-not-present environment, in the physical or the

virtual world, our Visa debit programs offer customers the broadest range of
opportunities to access their funds securely to purchase goods or services at
home or abroad.

Our Credit card base is approx. 50,000 and with the proposed migration to the
new software applications from our service provider, which has additional
features, we have planned to reach a customer base of 1.50 lakhs for credit
cards by 31.03.2014. Currently, 25% of the credit cards are used for purchase
transaction, either ‘Card Present’ or Card-Not-Present’, every month. The
biggest challenge for credit cards is to drive activation, increase number of
transactions in the month and also scale up acquisition.

While Debit cards are more aligned towards use through ATM channel, Credit
cards are widely used in PoS & Ecom. Usage in ATMs lowers our transaction cost
but usage through other channels generates revenue by way of Issuer income
(where the bank acquiring the transaction pays the Bank that issued the card).
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Why Cashback campaign?
Some cardholders begin using the product unprompted, while others do not
respond to repeated communications. Some consumers never use their Visa
debit card at the point-of-sale. Some consumers use their Visa debit card at the
point-of-sale, experience the convenience but still drop off. The selling process is
not the one best suited for the product.

1. Selling Process: Debit cards are automatically given to customers. There is no

‘active selling process’ at the branch at the time of account opening
2. ATM Reference: They are erroneously referred to as ATM cards by the branch
staff and also by the customer, thus giving the impression that they can only
be used at an ATM
3. Cash Habit: Cash is a deeply entrenched habit. From a socio-cultural
perspective also, cash is the most preferred mode of payment. Consumers,
especially, those outside the metros are comfortable in carrying and using
cash even for large ticket size transactions.
4. Customer Education: Research has shown that customers have high faith in
the branch staff. They are most receptive to the bank/ branch staff
educating them about the usage of their debit cards.
5. Fear: Lack of awareness also results in apprehensions around security,
settlement of disputes, loss of face due to declines and so on, which
motivate consumers to opt for cash.

The following are some of the major findings based on studies on customer
spending pattern:

1. Best time to activate card usage in PoS / Ecom is within 90-days of card
issuance
2. Building frequency of campaigns / offers is crucial for repeat usage
3. Active POS users maintain higher balances

We plan to achieve the following through a Cashback campaign:

1. Shift customers from using ATMs to PoS / Ecom for direct purchases (for Debit
cards), &
2. Change the preference of customers to draw out the IOB credit card from
among other competitors’ cards that may be in his / her wallet.

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EARLY ACTIVATION
Experience has shown that a carefully constructed package of educational
materials is an effective way to generate early activation. With all new
cardholders, the first objective is to educate and activate. Many issuers find that
common communications materials—letters, brochures and inserts—work well in
a welcome package.

Some customers will readily see the value and benefit of Visa debit and will
begin using the card for purchases. For this segment of the client base, the
initial issuance materials are sufficient. Many cardholders, however, will not
activate without additional enticement. For this particular segment, further
encouragement and incentives are required. Every subsequent effort to
activate new cardholders will require incremental investment by the issuer.

Customers are most receptive to communication and incentives when they are
new to the bank. All research and analytics has demonstrated that the most
effective time to activate is within 90 days of card issuance.

Even for credit cards, early activation is an extremely critical business driver.
Several issuers run incentive campaigns that reward early activation. However,
unlike debit cards, credit cards are sold actively to the cardholder at the time of
acquisition and the cardholder is aware of the benefits of a credit card. The
challenge with credit cards is to build propositions that make the IOB card the
preferred card for usage.

BUILDING FREQUENCY OF USE

Research and analytics across various countries and for banks in India have very
clearly proven that the higher the usage of a customer, higher is the propensity
to repeat usage. For example, customers who do just 1 POS transaction are at
the highest risk of dropping off. Nearly 60% of these customers do not use their
card again! However, customers with 5 or more transactions in a month have a
high propensity to come back. More than 80% of these customers come back
the following month too and remain active even 6 months later!

Transactions frequency is also the key driver of retention and spends for credit
cards. Higher the frequency of usage, higher is the spend per card. Given below
is the table that indicates the importance of frequency for IOB’s Credit Card
customers:

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 Frequency Txn/ Average % Share % Share of % Share
Spend/Active
Band Active Ticket Size of Active Transactions of PV
1 Txn 1.00 4,510 4,510 24% 5% 11%
2 Txn 2.00 3,178 6,355 17% 7% 11%
3 Txn 3.00 2,624 7,873 13% 8% 10%
4 Txn 4.00 2,351 9,404 10% 8% 9%
5-8 Txn 6.19 2,039 12,614 21% 28% 27%
> 8 Txn 13.60 1,613 21,932 15% 43% 32%
Total 4.66 2,145 10,004 100% 100% 100%

E-commerce – A big growth driver:

Debit E-commerce is a great stickiness driver. Customers realize the
convenience and security of using their IOB Visa Debit card online for bill
payments, railway ticketing, mobile and DTH recharges, and insurance premium
payments. From nearly 0% penetration of debit spends, e-commerce in 3 years
has reached 15% penetration and is growing at 80% YOY. For IOB, 30% of all
purchase transactions are contributed by e-commerce and they are growing
100% YOY.

E-commerce has been driving spends for credit cards as well. For IOB, 36% of all
purchase transactions in a month and 25% of Purchase Volume (PV) are
contributed by e-commerce. Credit e-com is growing at 48% on transactions
and 38% in PV terms, YOY. If it were not from e-com, IOB credit would have
shown a feeble growth.

Cashback campaign now proposed:

While the golden period for activating customers is within the first 90-days of
card acquisition, given the onset of the festive season, we have rolled out a
“FESTIVE SPECIAL” that rewards both new customers and existing customers
provided they deliver a desired behaviour; for the period and as per the
campaign constructs given below. It is ideal to launch activation campaigns
during peak festive seasons because customers are exposed to several
opportunities and card related communication.

Period of campaign (from 15th Oct 2013 to 31st Mar 2014)

As stated above, our Bank has a proportionately large volume of Ecom
transactions and Feb / March are considered as Ecom months due to travel and
ticketing for the holiday period. Hence we have extended the Cashback
Campaign period by another two months after the festive season ends in Jan
2014.

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The constructs of the CashBack offer are given in the terms & conditions
enclosed to this circular.

In case of both Debit & Credit programs, the additional revenue generated
during the campaign period (6 months) and post-campaign period (6 months)
will be offset by the Cashback payout during the campaign period. Hence, the
Bank will not be losing and the revenue generated will be static as during the
pre-campaign period. There will be a permanent increase in Issuer Income post-
campaign period and in case of credit cards would also result in higher interest
earnings.

INTEGRATED MARKETING AND COMMUNICATION

The program will achieve the required success only through effective
communication elements across all channels. Communication design,
elements, channels and branch involvement will play an extremely important
role in delivering campaign success. As the campaign is to run for 6 months, it
would be ideal to capitalize on customer on-boarding material as well.

We have already sent emailers to registered customers and are also sending
SMS along with transaction SMS. We are arranging for publicity through various
print, audio & television channels. The posters & leaflets are also finalised and will
be sent to all branches through the respective Regional Offices in co-ordination
with Marketing Dept. All branches, Regions & National GM offices should ensure
that customers are educated on this CashBack campaign and adequate
publicity is given to ensure that the Cashback Campaign becomes a success.

Conclusion:
This circular discusses various issues at length and is also educative for the
branch staff to understand how the card industry and associated payment
channels work. In a nutshell branches are expected to:

1. Do internal marketing to all branch staff to make them aware of the various
uses and features of cards and payment channels. Customers have high
faith in the branch staff and are most receptive to the branch staff
educating them about the usage of their Debit and Credit cards.
2. Issue Debit cards to all active Savings Bank A/c holders including premium
card variants to elite / HNI customers. For new accounts opened, Debit card
should be issued on the very date of account opening.
3. Instruct the teller & counter staff to educate customers to avoid cash
withdrawals at branch counters and divert them to ATMs / PoS.

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4. Move the customers using ATMs to PoS / Ecom. Make customers understand
that the PoS transactions are also highly secure as wef 01.12.2013, PIN is
mandatory for PoS transactions also.
5. Reach the targets given for issuance of Credit Cards.

Sd/-

(M Xavier Thilagaraj)
General Manager
Encl: Terms & conditions governing the Cashback offer

PS: Hindi Version follows

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 Cashback Constructs for use of IOB Visa Debit and Credit cards
Terms & Conditions
1. The Indian Overseas Bank (IOB) Cashback Promotion (the “Promotion”) is
open to all holders of Visa Credit and Debit cards (excluding Prepaid cards)
issued by Indian Overseas Bank in India. Cardholders should contact the
bank to confirm if the Promotion is open to them and/or for any further
details relating to the Promotion.
2. The constructs are as follows:

• Product: IOB Visa Debit

5%
• Reward:
o Max Rs. 100 for all customers with Spends in a month >=Rs.
UPTO 20,000
CASHBACK o Max Rs. 75 for all customers with Spends between Rs. 10,000
and Rs. 20,000
o Max Rs. 50 for all customers with Spends less than Rs. 10,000
• Usage: Use your IOB Visa Debit Card for purchases directly – shop,
pay bills online, recharge your mobile or cable, dine out, fill fuel
• Eligibility Condition: Minimum 3 transactions in a calendar month (1
transaction in Oct-13). Minimum transaction size Rs. 100
• Validity: 15-October 2013 to 31-March-2014

• Product: IOB Visa Credit

5%
• Reward:
o Max Rs. 200 for all customers with Spends in a month >=Rs.
UPTO 15,000
o Max Rs. 100 for all customers with Spends less than Rs.
CASHBACK 15,000
• Usage: Use your IOB Visa Credit Card for purchases directly – shop,
Security pay bills online, recharge your mobile or cable, dine out, fill fuel
• Eligibility Condition: Minimum 4 transactions in a calendar month (2
transactions in Oct-13). Minimum transaction size Rs. 100
• Validity: 15-October 2013 to 31-March-2014

3. The Promotion will be held during the period from 15 Oct 2013 to 31 March
2014 (both days inclusive) (the “Promotion Period”). The promotion will be
divided into 6 calendar months: October 2013 (17 days), November 2013,
December 2013 and January 2014, February 2014 and March 2014
(“Qualifying Periods”)
4. During each calendar month, based on the information available on IOB’s
network, IOB will identify Debit and Credit cards (each a “Card”) which meet
the eligibility criteria described below:
a. during the relevant Qualifying Period, the Debit Card has been used to
complete three or more successful purchase transactions (one or more
transactions between 15th & 31st Oct 2013) OR the Credit Card has been

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 used to complete four or more successful purchase transactions (two or
more transactions between 15th & 31st Oct 2013).
b. Successful transactions for which refund has been sought will be excluded
for the purpose of this Cashback campaign.
c. Add-on cards will be treated as separate cards for the purpose of
calculating the number of transactions and value of purchases and will
not be clubbed with the primary card.
d. Each transaction shall be for a minimum of INR 100 (Indian Rupees One
Hundred). Transactions below INR 100 will not be considered for the
purposes of the Promotion.
e. For the purposes of the Promotion, “purchase” transactions” shall mean
transactions where the Card has been used for a purchase transaction
either physically present at a merchant outlet or for a purchase
transaction such as an eCommerce (Verified by Visa) done on or through
the World Wide Web, it must have been subjected to additional
authentication/validation (second factor authentication) based on
information not visible on the Card (such as that offered under the
Verified by Visa service), in accordance with the regulations of the
Reserve Bank of India

5. For each Qualifying Period, Cardholders whose Cards have been selected
will each receive a cash back amount based on the cumulative purchase
amounts made on the Card during the Qualifying Period as per the table
below :
Debit Cards
Cumulative purchase in a Cash back Amount
Qualifying Period (Maximum)
< Rs.10,000 Rs.50
Rs.10,000 to < Rs.20,000 Rs.75
>= Rs.20,000 Rs.100
Credit Cards
Cumulative purchase in a Cash back Amount
Qualifying Period (Maximum)
< Rs.15,000 Rs.100
>= 15,000 Rs.200

6. The cash back amounts will be credited by Indian Overseas Bank into the
Cardholder’s account with the bank under the narrative “IOB Cashback -
<<Mon YYYY>>”, which will be reflected on the Cardholder’s card account
statement. This will be credited on a monthly basis during the next month
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 succeeding the qualifying period. Bank will not be responsible for any delay
in the posting of credits by the card issuing bank into the selected
Cardholders’ account.
7. The selected Cardholders will only be entitled to the cash back and will not
be entitled to compensation or benefits in any other form.
8. IOB makes no warranties or representations as to the fitness for purpose or
any other implied terms or conditions with respect to the products given
pursuant to this Promotion and the Cashback amounts.
9. All selections and/or decisions made by IOB in relation to the Promotion
(including without limitation, the selection of Cards for the cash back) will be
final and conclusive. No enquiries or complaints will be accepted or
entertained. IOB will not be obliged to publish the details of selected Cards or
the selection process. Cardholders should contact the bank if they have any
queries or complaints regarding the Promotion.
10. In no event will IOB be liable for any losses or damages howsoever arising
whether in contract, tort, and negligence or otherwise, in connection with
this Promotion, even if IOB has been advised of the possibility of such
damages in advance and all such damages are expressly excluded.
11. The Cardholders under the Promotion will be personally responsible for all
taxes, rates, government fees or any other charges that may be levied
against them under applicable laws, if any, in relation to the Promotion.
12. The Promotion is purely promotional in nature and IOB may, at its sole
discretion, discontinue the Promotion at any time, whether prior to or during
the Promotion Period, without prior notice.
13. IOB reserves the absolute right to, at its sole discretion, amend, vary and/or
withdraw any of the terms and conditions of the Promotion without prior
notice.
14. In the event of any conflict between these terms and conditions of the
Promotion and any promotional and marketing materials regarding the
Promotion, these terms and conditions shall prevail.
15. Nothing contained herein will, or will be construed to, constitute a contract
under the laws of India (including without limitation, the Indian Contract Act,
1872) between IOB, any Cardholder and/or the card issuing banks.
16. No claim or participation in the Promotion is valid in combination with any
other offer or promotion.
17. The Promotion and these terms and conditions will be governed by the laws
of India.
18. Information about the Promotion is correct at the time of publication.
Cardholders can refer for the latest set of Terms and Conditions on
www.iob.in.