Banks sold over 16 million new credit cards in FY23-24, Download Data PDF

According to a recent report by PwC India titled “The Indian Payments Handbook – 2024-29,” credit cards are experiencing significant growth. In the fiscal year 2023-24, the industry added over 16 million new credit cards, surpassing the impressive milestone of 100 million cards in use.

Future of Digital Payments

Mihir Gandhi, a partner and Payments Transformation Leader at PwC India, shared insights about the future of digital payments in India. He emphasized that over the next five years, the payments industry will focus on expanding ecosystems and exploring new uses for existing platforms. Key factors driving this growth will include:

• Embedded Finance: Integrating financial services into non-financial platforms.
• Ecosystem Finance: Creating interconnected financial services that cater to different user needs.
• Digital Lending: Using payment data to provide loans.
• Offline Payments: Enhancing payment options for those who prefer not to transact online.

Gandhi highlighted that innovation, better security measures, and increased financial inclusion are essential for a seamless digital economy.

Growth in Credit Card Transactions

With the influx of new credit cards, there has also been a notable increase in transaction activity. The volume of transactions rose by 22%, while the value surged by 28%. In contrast, debit card transactions have declined due to changing preferences among cardholders. Experts predict that the number of credit cards in India could reach 200 million by the fiscal year 2028-29, thanks to innovative features and products tailored to diverse customer segments.

Challenges for MSMEs and SMEs

In India, about 40% of Micro, Small, and Medium Enterprises (MSMEs) and Small and Medium Enterprises (SMEs) have a turnover of less than Rs 10 lakhs and employ between 1 to 100 people. Interestingly, less than one-third of these businesses engage in online marketing and sales. This data highlights the financial challenges these small businesses face. Many are cash-strapped and require low or interest-free credit, along with quick and secure credit approval processes.

Unlike larger corporations, MSMEs and SMEs must carefully manage their finances with a primary focus on working capital. Often, small business owners use their personal accounts or credit cards for business expenses, which can complicate their financial situation. This approach can lead to reconciliation issues and limit the rewards typically associated with business expenditures.

The Benefits of Business Credit Cards

To address these challenges, top issuers in India are introducing commercial and business credit cards specifically designed for small businesses. These cards can offer interest-free loans for 45 to 55 days, providing crucial support for managing working capital. Some business credit cards also include features that track accounts payable and receivable, thanks to partnerships with software providers.

These financial solutions allow small businesses to keep personal and business expenses separate, simplifying financial management. The global market for small business credit cards has seen growth, offering benefits such as competitive annual percentage rates (APR), rewards for business spending, and solutions for tax payments.

The Rise of Virtual Cards

Post-Covid-19, the B2B payment landscape has transformed significantly with the rise of virtual card payments. Virtual cards provide businesses with unique options, such as single-use cards for secure transactions. These cards simplify the reconciliation process, making them especially useful for companies involved in third-party transactions. For instance, many delivery startups in India use single-use virtual prepaid cards to streamline their payment processes.

Businesses can integrate virtual cards into various operations, including accounts payable, corporate travel, and payments for events and services. The virtual card market is expected to grow rapidly, particularly in the Asia-Pacific region.