– Increases in credit card transactions and spending are eating into the debit card market, while debit card transaction volume and value are declining.
According to data from the Reserve Bank of India’s Statistical Manual of the Indian Economy FY2023, credit disbursement jumped 47.4% to 1,432 billion rupees in fiscal 2023, with the number of transactions increasing to 2.91 billion rupees from 2.24 billion rupees in the previous year.
On the other hand, debit card spend fell to Rs 719 crore from Rs 730 crore in FY22 as the number of transactions fell to Rs 342 crore from Rs 394 crore.
Shifts in trends since the pandemic
Debit and credit card transaction volume and value had grown steadily through fiscal 2021, but transactions and spending declined as spending was curbed during the pandemic. The data shows that credit card spending has been higher than debit card spending every year except FY21 since at least FY2019.
Credit card preference rises
Post-COVID-19, debit card spending and transactions have gradually declined, while credit card transactions have rapidly gained market share, mainly due to increased customer preference for credit cards due to the additional rewards and cash back offered by credit cards.
As of March 2023, the number of active credit cards was 850 million rupees, a growth of 15.9% for the year. According to the latest data from the Reserve Bank of India, credit card spending totaled Rs 1,430 crore in fiscal 2023, a year-on-year growth of 47%.
Factors driving usage
Sanjay Agarwal, MD and CEO of AU Small Finance Bank, said on the sidelines of a recent event that apart from rising credit adoption and increasing affordability of PoS (point of sale) like EMIs, the increase in credit card spending is also driven by the following factors driven by: convenience, practicality and raising awareness of this type of card.
As of the end of July, the total number of active credit cards was Rs 89.9 crore and the number of new credit cards every month ranged from Rs 9 to Rs 12 lakh. Monthly credit card spending has remained above Rs 100 crore for nearly 1.5 years, touching a record high of Rs 145 crore in July.
In comparison, as of July 2023, the number of outstanding debit cards was Rs 97 crore and transactions worth Rs 53,313 crore were being processed.
UPI becomes a strong competitor
As the use of UPI (Unified Payments Interface) surges in peer-to-peer (P2P) and peer-to-merchant (P2M) transactions, debit card usage has dropped significantly, especially for small-value transactions.
Milestones for UPI
The UPI network crossed the Rs 1,000-crore monthly transaction volume milestone in August 2023, processing a record 1,058 transactions worth Rs 1,576 crore in the month.