Axis Bank's Lucrative Magnus Card Is Set To Lose Some Of Its Shine

Axis Bank's Magnus credit card, targeted at affluent customers, will soon become less attractive.

The bank has decided to devalue rewards on the card and exclude certain payments from earning reward points as well, with effect from September 1, according to a notice shared on the bank's website on Friday.

The move itself is an about turn from an earlier decision by Axis Bank to introduce even tighter devaluation of reward points. After considerable opposition from customers, that decision was withdrawn. The latest notice does introduce devaluation of rewards, but at a smaller scale than the last notification.

Among the major changes introduced on Friday is lowering the swap ratio of card rewards to airline or hotel miles programs. While earlier customers could swap five reward points for four miles, now the ratio will be lowered to 5:2.

In the previously withdrawn notification, the proposal was to reduce the conversion ratio to 5:1.

Interestingly though, Axis Bank has offered to keep the original ratio in place for customers that already hold or sign up for a private banking account with Axis Bank under the Burgundy offering. Private banking offers high-net worth individuals with wealth management and other additional services.

Axis Bank requires customers to have a salary of over Rs 3 lakh a month to access Burgundy, among other criteria.

If customers do opt in to open an account to maintain reward ratios, this would allow Axis Bank to tap affluent individuals for other products as well.

"We review our product features and customer offerings from time to time. This exercise is done to ensure that we are able to provide the best-in-class features to our customers sustainably," Axis Bank stated in the notice announcing the changes.

The primary motivations behind changing the rewards are consolidation efforts towards clubbing Axis Magnus and Axis Burgundy rewards. Apart from that, the bank has also seen deviant spending behaviour by some customers like extraordinary repeated transactions, said a person familiar with the development to BQ Prime.

In certain cases, users were spending abnormally high amounts on utility bill payments using their Magnus cards. As the bank had visibility on their past payments, it was evident that these higher spends were out of the ordinary, requiring action from the bank, this person said.

In certain other cases there were utility payments without a clear vendor on the other end, indicating deviant card behaviour.

But the reward point structure with the Magnus card was too good to be true, to begin with, according to Ankush Dixit, founder and CEO, Multiply, who also routinely discusses the pros and cons of various credit cards on his social media profiles.

"They were phenomenal returns of over 30% but users always knew that it was short lived as devaluation is a normal exercise. Users were always prepared for devaluation to happen," Dixit said.

Although rewards are typically given at a rate 0.6-1% of transaction value, more recently some banks have gone as high as 2%, a card industry executive said, speaking on condition of anonymity.

Typically, such a high degree of rewards as a promotional exercise or to build a customer base ripe for cross-selling, this person added.

The other changes made by Axis Bank on Friday include:

• Raising the annual fee from Rs 10,000 to Rs 12,500.

• Fee to be waived after spends worth Rs 25 lakh, compared to Rs 15 lakh a year, earlier.

• Utility services and government institution payments excluded from reward eligibility.

More than the launch, the ownership of the Magnus credit card was an 'it' thing for many. The card came with swanky rewards, benefits and also had a brag element to it, according to financial sector influencers said.

While the bank did not actively actively promote this flagship product through influencers, many on social media were keen to discuss the incredibly high rewards.

But the devaluation may not have gone too well with the users. From 'party is over' to 'thank you for your service', social media expressed their disappointment with the announcement on Friday.

The monthly milestone benefits of 25,000 reward points on monthly spends of Rs 1 lakh, which have now been discontinued, were one of the most important selling points of the card, according a social media influencer who actively discussed the benefits of the card before. This person spoke on condition of anonymity.

As the changes become better known among Magnus users, it will be interesting to see if customers stick around or decide to close their cards.

Axis Bank is a sizeable player in the credit card market, with over 14% market share and is the fourth largest issuer as of March. In FY23 alone, the bank issued 4.2 million new cards. As of March 31, the outstanding loans toward credit cards were Rs 31,684 crore, up 97% year-on-year, according to disclosures made by the bank.

It also concluded the acquisition of Citibank's retail banking business, on March 1 for Rs 11,603 crore. This acquisition included the foreign lender's 1.8 million premium credit card holders.