The Maths behind the rise in credit card transactions in India

Credit card transactions have surpassed debit card usage in India, with credit card use overtaking debit card use in April 2023, according to data from the Reserve Bank of India

Sangeeta Ojha
Updated15 Jun 2023, 03:01 PM IST
Rise in credit card transactions in India: The surge in credit card usage in India signifies a notable transformation in the country's digital payments landscape.
Rise in credit card transactions in India: The surge in credit card usage in India signifies a notable transformation in the country’s digital payments landscape. (iStock)

Rise in credit card transactions in India: After the Unified Payments Interface (UPI), now credit card transactions have surpassed debit card usage in India. Recent data from the Reserve Bank of India showed a significant rise in credit card transactions. Credit card use has overtaken debit card use in April of this year, with 25 crore merchant card transactions compared to 22 crore in April of last year. When compared to debit cards, credit card transactions had a total value of 1.33 lakh crore as opposed to 53,000 crore. These include purchases from e-commerce and physical outlets.

The surge in credit card usage in India signifies a notable transformation in the country's digital payments landscape. Historically dominated by debit card transactions, the shift towards credit cards is driven by several factors, said Ashish Aggarwal, Director, Acube Ventures. 

Factors behind the rise in credit card transactions in India

Firstly, the significant increase in credit card transactions, both in terms of volume and value, underscores the growing acceptance and adoption of this payment method by consumers at both online and offline merchants.

While the rise of UPI has impacted debit card usage, the remarkable growth of the credit card ecosystem indicates its enduring appeal. “With credit card swipes experiencing a 20% surge over the past year, while debit card transactions have declined by 31%, it is evident that consumers are embracing the convenience and benefits associated with credit cards,” said Ashish Aggarwal.

Consumers use credit cards as a way to manage their finances.

“The 48-day interest-free period enables consumers to make sure they have enough liquid cash to satisfy their daily needs by shifting the responsibility of spending to credit card issuers,” said Vinit Khandare, CEO and Founder, MyFundBazaar

Users of credit cards typically spend twice as much online as they do offline, indicating that they prefer the added protection that credit cards provide while making purchases, he added.

According to Ashish Aggarwal, the rise of co-branded credit cards in partnership with leading banks and consumer-facing apps demonstrates the strategic approach taken by Indian startups to diversify their revenue streams. These collaborations enable businesses to leverage the popularity and user base of established brands, while offering attractive incentives such as discounts and rewards to credit card users, thereby fostering customer loyalty.

However, it is essential for consumers to exercise caution and responsible financial behavior when using credit cards. “The exponential increase in credit card outstanding amounts, reaching 1.9 lakh crore in March 2023, highlights the potential risks of overspending and accumulating high-interest debt,” added Aggarwal.

Ultimately, the growing adoption of credit cards in India reflects both the improved accessibility and changing attitudes of consumers towards credit. As the credit card ecosystem continues to expand, it is imperative for users to strike a balance between enjoying the benefits of credit and maintaining sound financial habits to avoid potential pitfalls associated with excessive borrowing.

India tops in digital payments, says MyGovInd

Meanwhile, with 89.5 million digital transactions in the year 2022, India has topped the list of five countries in digital payments, according to data from MyGovIndia. As per the data, India in the year 2022 accounted for 46 per cent of the global real-time payments.

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First Published:15 Jun 2023, 03:01 PM IST
HomeMoneyThe Maths behind the rise in credit card transactions in India

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