UPI Reigns Supreme, But Credit Cards Still Dominate Online Transactions

Credit card usage in India is on a roll, fueled by online transactions and attractive offers. Here’s a quick summary of the key findings:

Booming Online Transactions Fuel Credit Card Growth:

• Two-thirds of credit card spending happens online, compared to just one-third for debit cards.
• Online transactions favor credit cards, with 75% using them compared to 50% for offline purchases.
• RBI data suggests UPI impacts debit card growth more than credit cards.

Regional Distribution and Recent Regulations:

• West and South India dominate credit card usage, with 75-80% of cards issued there.
• RBI’s recent guidelines led to closing inactive cards, impacting outstanding credit card share.
• Despite modest overall growth, spends and receivables remain healthy, growing at 20-25% CAGR.
• Higher-limit cards are becoming more common, reflecting better spending avenues and increased trust in cards.

International Travel and Festive Season Boost Spending:

• Visa’s study highlights the importance of travel miles, cashback, and high limits for international travel.
• 99% of Indian travelers prefer cards while abroad, emphasizing their convenience and security.
• Credit card spending reached a record Rs 1.78 trillion in October 2023 due to the festive season.
• E-commerce platforms drove this growth, with spending on electronic goods surging.

Luring Offers and EMI Options Drive Consumer Spending:

• Banks and financial institutions offer attractive deals like low-interest rates and cashback during festive seasons.
• This makes credit more affordable and encourages purchases through EMIs.
• For example, 3 in 4 Amazon Prime members used the Amazon Pay ICICI Bank co-branded credit card for cashback offers during their Great Indian Festival sale.
• Promotions and offers on EMI purchases also contribute to rising credit card usage.

RBI Tightens Norms to Curb Personal Loan Growth:

• Due to the rising trend of personal loans, the RBI has increased risk weights for banks and NBFCs on retail loans.
• This increase in capital requirements will make loans costlier and likely curb their growth.