Credit cards see a healthy growth for high-value transactions online

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While debit cards continue to be the most preferred payment route – at point of sales (PoS) as well as online transactions, credit cards have shown a healthy growth in high-value online transactions. This is despite a steady decline in plastic card usage in India.

According to the Reserve Bank of India (RBI) data, the number of card payments – both credit cards and debit cards collectively – has seen a dip to 50.7 crore in February, 2021, from over 61 crore transactions reported a year ago, in February 2020. While debit cards were used for 35.5 crore occasions, credit cards used only for 16 crore transactions.

Interestingly, in terms of value of transactions, debit and credit cards have nearly an equal share. While debit card transaction value in February moved to Rs 59,478 crore from Rs 58,561 crore a year-ago, credit card payments have declined to Rs 60,105 crore from Rs 62,147 crore in February 2020.

Online transactions

Most interesting trend is seen in online transactions. Online credit card transaction value in February has seen a growth to Rs 32,350 crore from Rs 28,701 crore, despite a drop in number of usages. This clearly shows that the value of each transaction has definitely gone up. On the other side, the credit card transaction value at PoS terminals has seen a major decline.

The numbers tell us a clear trend of people increasingly using their debit cards at the neighbourhood grocery stores. The value of debit card transactions at PoS transactions have gone up to Rs 37,465 crore in February 2021, up from Rs 36,258 crore a year ago.

However, both debit and credit cards have shown an increase in the number of cards. While debit cards have reported a 9% growth to 89.4 crore in February, credit cards have shown an 8% to 6.2 crore. The industry ratio for credit-debit cards has dropped to 1:7. This means for every seven debit cards, there is only one credit card.

Cautious stance

“Most banks are cautious in expanding their credit card customer network because of the increasing delinquencies. In the pandemic, many banks have reported an increase in defaults by credit card payments,” said a Mumbai-based banker.

Banks, are however, comfortable to expand their credit cards among the existing customer base.

Federal Bank, a private bank which is all set to launch its own credit card in a few weeks, said its initial plan is to tap the existing customer base initially.

“We have around 87 lakh active debit card users today, and we are the fifth largest private sector bank in terms of the debit-spend,” said Nilufer Mullanfiroze, country head for deposits, cards & unsecured lending (retail business) of Federal Bank.