As credit card transactions rise in India, debit cards take a backseat

Recent data from the Reserve Bank of India (RBI) shows that out of 25 crore card transactions in the month of April this year, 22 crore were credit card transactions

Historically, India was a debit card-using nation but recently, credit card transactions have gone up significantly, shows recent data from the Reserve Bank of India (RBI).

With 250 million card transactions for merchant payments in the month of April this year, both at e-commerce and physical outlets, credit cards have overtaken debit card swipes, which stood at 220 million. In terms of value of transactions, credit cards stood at Rs 1.3 trillion against Rs 53,000 crore for debit cards, according to a report in The Economic Times (ET).

Credit card swipes jumped 20 per cent in the last one year, while debit cards fell by 31 per cent.

The unified payments interface (UPI) is eating into debit card usage, but the growth of the credit card ecosystem shows the adoption of the product.

There were 5.36 billion UPI merchant transactions in May this year, while it was 2.54 billion such transactions a year back.

In India, the number of credit cards currently stands at 85 million against 75 million a year back. Three years back, this number was less than five million, according to the ET report.

An executive at a fintech firm said that a large clothing marketplace might operate at a margin of 50 per cent to 60 per cent and thus it can easily offer a 10 per cent discount for its credit card users.

Banks want to expand their credit card base, but customer acquisition continues to be a challenge. A branch could spend around Rs 2,000 to onboard one credit card user, with major costs being feet-on-street agents and physical booth rentals at malls and airports. But these large applications can bring in a steady stream of customers from their apps.

One such successful partnership is between Amazon Pay and ICICI Bank. Vikas Bansal, whole-time director, Amazon Pay India, pointed out that activation rates on these credit cards hover around 70 per cent against the industry standard of 50 per cent.