Credit cards were surging forward in terms of demand and usage, as of December 2019, a report by Crif High Mark showed. But since the covid-19 pandemic, people have been turning to mobile payments, and a recent S&P Global Market Intelligence report said that they have gained a lead over credit cards. What does this mean for the future of plastic money?
Cards in demand
As of December 2019, the credit card industry portfolio stood at ₹1,24,390 crore, a year-on-year growth of 44%. In September 2019, there were 3.25 crore active card borrowers, the number has grown at a compounded annual growth rate (CAGR) of 22% over four preceding years. The latest CRIF CreditScape report, released in May, stated that projections show that around one million credit cards will be sourced over the next five-six quarters.
“Credit cards, once considered a product for the affluent, have expanded to consumers in tier II and III cities. Borrowers opting for a credit card for the first time have increased by three times in four years. Credit cards lead to increased purchasing capacity for consumers, especially millennials, and encourage usage by offering rewards and discounts on e-commerce portals." said Navin Chandani, managing director and chief executive office of CRIF High Mark.
An emerging alternative
The S&P Global Market Intelligence report released earlier this week stated that mobile payments rose 163% to $287 billion in 2019, whereas transactions through debit and credit cards increased by 24% to $204 billion. According to the release, mobile payments are expected to gain a bigger lead over card payments, as the ongoing social distancing norms and concerns over the use of cash and plastic money will further boost their uptake.
On how credit cards match up to alternatives such as mobile payments, Chandani said, “In the wake of covid-19, online transactions and contactless payments have leapfrogged. Banks have also initiated the facility of a virtual card to facilitate e-commerce transactions. Virtual cards can be used immediately until the physical card arrives through the courier."
Space to coexist
While there is a perceived rivalry between the different payment modes, according to Raj Khosla, founder and managing director, MyMoneyMantra, credit cards and mobile payments overlap only in the fact that they are both digital modes of payment, beyond that, they exist in different spaces.
“The demand for credit will always be there. With the government’s push for UPI, mobile wallets have given way to payment systems that don’t require preloading, and therefore, function just like debit cards. The digital push and covid-related circumstances mean growth in this area will accelerate. But credit cards exist in a different space, and I don’t see the demand for them falling anytime soon," he said.
As for whether debit cards could be on their way out, Khosla said that most would prefer to retain both cards and mobile payments, as they provide different conveniences and benefits.
While the covid-19 pandemic has pushed many customers to opt for mobile payments, credit cards are likely to endure as an easy source of credit, as well as additional benefits like points and discounts.