The ongoing recession has encouraged Indian consumers to use debit cards more than credit cards. At least this is what becomes obvious if one goes by the findings of a study conducted by transaction processing and knowledge management company Venture Infotek.
According to the firm’s report, the number of debit card transactions during February 2009 vis-à-vis September 2008 saw an increase of 36.6 per cent as against an increase of 25 per cent for credit cards. In value terms too, daily transactions through debit cards increased by 27.2 per cent in February 2009 vis-à-vis an increase of 13.3 per cent in credit card transactions in the period under review.
A six-month time period was taken for the study to substantiate what the Reserve Bank of India (RBI) information states, said the company. It also said that financial volatility was the maximum during this period.
| PLASTIC AGE Growth rate of average daily volumes and daily transactions (Feb 09 as compared to Sep 08) | ||
| Debit | Credit | |
| Volume | 36.60% | 25.00% |
| Amount | 27.20% | 13.30% |
| Source: Venture Infoteck Research | ||
As per recently released RBI data, the total value of Point-of-Sale (PoS) transactions through debit cards from April-January 2009 registered an increase of 51.4 per cent over the same period last year, whereas the increase in value of PoS transactions for credit cards for this period was just 17.4 per cent.
Even in volume terms, the Indian consumer has used debit cards for 46.8 per cent more PoS transactions in April-January 2009 than the previous year. PoS transactions through credit cards registered just a small increase of 17.1 per cent for the same period.
The report further states that, according to RBI information, the number of credit cards in circulation has declined from 28.3 million cards in April 2008 to 25.8 million cards in January 2009. While the number of debit cards went up by 25.2 per cent for this period, rising from 105 million cards in April 2008 to 131.4 million cards in January 2009.
“The Indian consumer is treading cautiously when it comes to purchases and is exhibiting a credit-averse behaviour. This can be seen from the steep rise in spends through debit cards vis-à-vis the rise in spends through credit cards in India. The ‘pay now’ feature of debit cards discourages dependency on credit and helps in better financial planning and control of purchases by the consumers,” said Piyush Khaitan, managing director, Venture Infotek.
The report also notes that, as against credit cards, ATM-cum-debit cards offer a ready consumer base in the bankable population of India. The increasing acceptance of debit cards at both physical and online merchants is also driving spends through debit cards.
Khaitan feels that the uptake in debit cards is also due to banks going slow on issuing credit cards, but have been promoting spends through debit cards.
