Can zero-forex, lifetime-free Scapia outdo other travel credit cards?

Scapia offers a lifetime free (LTF) credit card in partnership with Federal Bank that earns rewards on most purchases and lets you redeem the accumulated rewards towards hotels and flight tickets through its mobile application. It gives unlimited domestic lounge access after you spend ₹5,000 on the card in a month—among the lowest lounge eligibility criteria in the industry—and zero forex markup on international spends. Forex markup is a fee that the bank or card-issuing company charges to enable international transactions on a card.

Anil Goteti, founder, Scapia, said the firm offers forex conversion at a mid-market rate. “Our spread is the same as the Visa [card] rate," he said.

Both zero forex markup and lounge access are key value propositions of any travel credit card. Gurgaon-based Shaleen, who did not wish to be identified by his last name, took the Scapia card before he set out for his vacations to Germany earlier this year. Hitherto, he had to pay the markup and tax on each foreign spend, so Scapia’s no-forex proposition was impressive.

“The app gives instant notification on the actual amount debited in INR (Indian rupee) as soon as you transact abroad. That’s very convenient. Credit card statements after a foreign trip are cluttered as they have many components like conversion fee, bank charge, GST, etc," he said. GST is short for goods and services tax.

Scapia card’s reward system is fairly simple. You earn 10% in the form of Scapia coins on all purchases done outside the Scapia mobile application and 20% on flight and hotel bookings made through the app. The value of five Scapia coins on redemption is ₹1. Flights or hotels booked from any platform other than Scapia will earn 10%. Accumulated coins can be redeemed to book flights or hotels through the same app.

Scapia rewards have a monetary value and are not given as air miles or hotel points. “We have built the ‘flights and stays’ booking experience inside the app that allows users to instantly redeem their coins," said Goteti. This makes the app supremely user friendly as one doesn’t have to go through the hassle of first converting rewards into specific airlines’ or hotels’ loyalty points and then redeem them.

Ankush Setia, co-founder, Multiply, a credit card comparison platform, said Scapia card serves its intended customers well. “Flight tickets through airmiles are more rewarding on business class tickets. Similarly, you earn loyalty points of 5-star hotel chains. To earn such premium deals one needs high annual spending, which those in the ₹7-9 lakh annual income bracket will anyway not do. Scapia, through revenue tickets, will earn you free flights and hotel tickets around the world without these conditions, which is what a young traveller wants," he said. Think of the Scapia app as an online travel aggregator (OTA) that lets you make bookings with its own currency, Scapia coins in this case.

Since the user is not bound to specific hotel chains, they don’t have to wait for enough reward points are accumulated before redeeming them. For instance, if you have reward points worth ₹5,000 on a credit card that only has tie-ups with premium hotels, these may not be sufficient to get a room in, say, a Marriott property, as the room fare is costlier. Whereas, if you have Scapia coins worth ₹5,000, you can book a room in a 3-star hotel or a homestay and don’t have to wait until your next trip to accumulate enough points.

Not the best

Convenience and superior user experience aside, how does Scapia’s reward rate look like?

At a 2% rate on non-travel purchases, the reward rate is decent compared to the industry average. However, 4% on travel spends (done through Scapia app) pales in comparison to other non-premium travel cards. Take Axis Atlas for instance. It gives 5% rewards on flight and hotel booking done on Axis bank’s Traveledge platform. Sumanta Mandal, founder, Technofino, pointed out that, after conversion to air miles, Atlas’s reward rate adds up to 10%.

“Amex Platinum Travel Credit Card can give up to 12% rewards on ₹4 lakh spend, which you easily spend in a year. Even if you look at co-branded cards like the Indigo credit card by Kotak Bank, the reward rate is about 7-9%," he said. Take note that both the cards mentioned charge a joining fee of ₹3,500 ( ₹5,000 second year onwards) and ₹2,500, respectively. Axis Atlas card charges a joining fee of ₹5,000 but gives 5,000 Edge Rewards, or ERs (1 ER= ₹1) as welcome benefit, which offsets the joining fee.

Mandal explained that banks easily earn over 10% commission from partner airlines, hotels and travel aggregators on driving sales through credit cards, so a 4% reward rate passed on to the consumer is pretty low.

Setia said those new to credit cards, who may not get premium cards like HDFC Infinia, can look at Scapia for travel benefits. “For credit card savvy users, there are far better rewarding cards," he said.

However, take note that getting the Scapia card could be difficult, especially for new users. This is because the bank issues the card to those with at least 700-750 credit score. So, a new customer with no Cibil history may not qualify. Mandal said that Federal Bank has even rejected applications of those who have had three hard enquiries on their Cibil at the time of application. Hard query refers to a bank or any other financial institution pulling out the credit history of a customer.

Customers with an existing Federal Bank credit card, including OneCard, or a personal loan taken from the bank will not get it either. “The criteria for issuing the Scapia Federal Credit Card is determined by our banking partner on various factors, including Cibil score, past credit history, current loans and cards, and overall credit exposure for the bank. Given the confidential nature of the policy, we are not privy to these proprietary criteria," said Goteti. Federal Bank did not respond to Mint’s query on the reason for these stringent conditions.

Zero-forex is a big pull

Currently, the biggest advantages of Scapia are unlimited lounge access and zero forex. “At a time when even big banks like HDFC are asking customers to spend at least ₹1 lakh in a quarter for lounge access, Scapia’s monthly ₹5,000 limit is definitely a good offering," said Mandal.

Zero-forex on foreign spends has been a big pull for its users. A case in point is Shaleen. However, he has not used the card for any other spend so far. He thinks that the option to use the reward coins directly to book a flight is convenient and user-friendly, but there are better reward rates on other cards to bag free flight tickets.

In Delhi, Ayush Aggarwal, 28, shares the same experience. “I use Scapia as a backup card abroad at places where my Diner card doesn’t work, for instance, in the UAE. Diner is my preferred choice wherever it is accepted as it has a high reward rate which cancels out the markup cost," said Aggarwal. Scapia doesn’t earn rewards on international spends.

It is common for fintech companies to load multiple benefits on credit cards launched in partnership with banks at no annual fee to attract customers, say financial experts. However, building a sustainable reward system is difficult as they compete against banks that have deep pockets and avenues to cross sell other products.

Goteti said the aim is to sustainably build a long-lasting reward programme and be cautious to not reward on categories where misuse is possible, like rent, education fees, e-wallets load etc. Federal Bank’s current stringent eligibility conditions are also indicative of the bank’s intent to keep it an exclusive card.

Setia said it is imperative for fintechs to build a product around the card and create a revenue stream. “Just card issuance fees and a part of MDR (merchant discount rate) are not enough for a fintech company to thrive. Scapia is doing it differently. By creating a travel portal, they are giving rewards only if you make travel purchases through them, which means additional commissions. Second, they are in the process of launching an EMI (equated monthly installment) option on the card which will definitely sell," he said.

The downside of Scapia app as an aggregator is that you can’t compare prices for stays with Airbnb or flights on other OTAs to get the cheapest deal. Goteti emphasised that they have tied up with over 500,000 hotels and all major airlines worldwide and they offer competitive pricing. Mint’s research showed that Scapia’s hotel listing prices are nearly the same as those offered by other OTAs, such as Makemytrip and Booking.com. But the number of listings were comparatively less.