Driven by the government’s focus on less-cash economy, digital payments have grown exponentially in the last few years. While digital payments had been growing consistently even before 2020, the COVID-19 pandemic accelerated it further. As a result, Credit cards have also witnessed robust growth in India.
Specifically, the first credit card in India was launched in 1980. Since then, credit card payments in India have come a long way. And when we look back at the last decade, the ubiquity of the credit cards in the country has increased drastically as can be seen from the recent numbers. In April 2022, the outstanding credit cards witnessed about 20.7% YoY growth, reaching over 75 million. Most importantly, card spends have been witnessing all-time high numbers. Card spends have been crossing Rs 1 trillion mark as seen in the months of March 2022 and April 2022.
Today, credit cards have an established and increasing usage in both offline and digital domains. In fact, e-commerce spends value for credit cards was about 60% of the total credit card spends in April 2022. While e-commerce has undoubtedly played an important part, several other supporting factors also aided the growth of credit cards. There has been a consistent expansion of support infrastructure with increased PoS infrastructure, higher mobile penetration, improved connectivity, faster data speed and lower mobile data costs. These have, overall, given a fillip to the acceptability and usage of credit cards by consumers even in tier 2 and 3 cities.
Like any other industry, the changing consumer preferences and ever-increasing innovation in technology has also set the credit card industry on the path of transformation. This has led to a shift from previously prevailing credit card usage patterns of customers. Earlier, credit cards were only linked with large transactions but today they have become one of the preferred payment instruments for smaller transactions like groceries as well. Further, an interesting trend can be seen in the evolution of spend categories. In our experience at SBI Card, apart from traditional categories, there are several new categories which have emerged. Categories such as health & fitness, utility, education, and rent among others, have been attracting a healthy share of consumer spends, contributing to the growth of credit card spends in the past couple of years.
Another important shift has been the accelerated adoption of contactless payments. The characteristics like ease and swiftness in payments coupled with no-contact precautionary measures owing to pandemic has driven the awareness and need among consumers. As we stand today, India has seen 5X growth in contactless payments in just five years with over 8 million merchants adopting these. This is a phenomenal growth, and an equal pace of adoption is expected in the future too.
At present, credit cards are witnessing a transitionary phase – from a plastic card to a virtual one embedded in your phone. While we will see changes in its form factor in the future, its relevance and ubiquity will continue to exist. This will be ensured by the integration of many new-age technologies like Artificial Intelligence, Machine Learning, Host Card Emulation etc. and introduction of innovative consumer experiences crafted with the help of these advanced technologies. Owing to this, credit cardholders’ journey, right from card enrollment to card usage to repayment, is bound to become more seamless and enriching day by day.
When it comes to credit cards penetration in India, we have just touched the tip of the iceberg as of now. The growth potential remains immense and with the positive regulatory momentum supporting the digital payments in India, we have several new highs to achieve in our journey.
Rama Mohan Rao Amara, MD & CEO, SBI Card