India’s credit card companies and banks are seeing a rebound in customer spending with more customers shifting towards contactless modes of payments, mirroring a global trend.
Data for May shows that credit card spending is rising and new card issuances have also increased.
In a business update earlier this month, SBI Cards said daily card spends have reached 60-65% of the levels seen prior to the lockdown, with managing director and chief executive Hardayal Prasad saying the company is witnessing pent-up demand.
“Online spends have been going up and there is a shift in payment from cash to digital. We are going to witness a significant shift in the customer behaviour. The daily spends are touching pre-covid levels and, interestingly, there is significant amount of stability in daily spends," Prasad said.
SBI Cards added 27,000 cards in May, compared with a 250,000-300,000 run-rate per month normally.
The trend towards credit cards was substantiated by a Mastercard study, which said that e-commerce and contactless payments are continuing to grow in popularity as people make the move to digital by default and reduce dependence on cash.
“A large majority in India (77%) believe the shift to contactless payments is here to stay. The shift is underway globally as almost six in 10 consumers say the move to digital payments is likely to be permanent and nearly half plan to use cash less even after the pandemic passes," said Mastercard.
With the easing of the lockdown since May, customers have also begun shopping for non-essential items such as electronics, consumer durables and online education, which have now become essential with most working from home. However, discretionary spending on travel and hospitality has become the biggest casualty of the covid-19 pandemic and is unlikely to return to normalcy soon amid fears of contracting infection.
Credit card firms are now pinning their hopes on big retailers who are expected to launch sales, when malls open up fully in the next few months to dispose of unsold stocks.
Credit card firms and banks expect the growth in spends to recover and exceed pre-covid levels only by August.
“The pent-up demand will last for 2-3 months. We will need to watch the sales during the festive season and the customer response. This will give us a fair sense of how the year will look like. However, we do expect a number of retailers and brands to dispose of their stocks and an increasing trend of sales going forward," said Parag Rao, country head, card payment and merchant acquiring, HDFC Bank.
Many banks and credit card firms said they have lowered spending limits for customers due to the impact of covid-19.