The credit card industry has grown tremendously in India. Smooth onboarding journeys, differentiated products, personalized offers & rewards, and better mobile apps, have proved to be greatly beneficial to existing customers and have helped attract new ones as well. With the emergence of e-commerce, the adoption of contactless payments, and changes in the value proposition, the post-pandemic credit card space has undergone considerable change and is evolving constantly.

Traditionally, credit card issuers have focused on customers belonging to high-income, salaried professionals, residing in tier-I cities, and those with a good credit score. There is an emerging need to penetrate newer segments in order to broaden the customer base for credit cards and encourage their widespread adoption.

Read below where we look at the credit card landscape and how it compares with other modes of digital payments

Although HDFC Bank continues to be the industry leader, the issuer has witnessed a steady decline in its market share of outstanding cards, or credit cards-in-force, owing to the ban on issuing new cards imposed by the Reserve Bank of India (RBI) in December 2020. The restrictions were lifted early this year. Across issuers, outstanding credit cards witnessed a decline in August as issuers shut inactive cards to comply with the RBI guidelines. Despite this, the momentum on card spending continues to be strong owing to lucrative sale events on e-commerce platforms.

Although UPI has managed to garner a lion’s share of the digital payments pie, it has been observed that credit cards are still the preferred mode for high value transactions. Our study reveals average spends on credit cards to be ~INR 20,000 as compared to ~INR 8,000 for UPI. This stems from 2 factors: the ability to make a large transaction on a credit basis and lucrative rewards points/ cashback with every order. UPI is currently seen as a convenient alternative to carrying/ transacting in cash while credit cards tend to solve for a customer’s credit need.

Most credit cards tend to offer sizable upfront discounts/ cashbacks as compared to other payment modes which incentivize customers to transact on the same. Credit cards help users manage their cash flows better thereby boosting liquidity. Other triggers behind the usage of credit cards include reward points which can be used to unlock deals/ discounts on travel, entertainment, and other products; converting a big purchase into an EMI and keeping a record of various expenses made.

According to our study of customers who use multiple credit cards, it has been observed that the amount of cashback/ reward is the biggest driver behind the selection of a specific card for a specific transaction. Certain card issuers tend to have exclusive tie-ups with e-commerce portals, food delivery apps, etc. which triggers their usage amongst customers. This is followed by the available credit limit especially while making multiple purchases or a large transaction.

India is still an underpenetrated market with only 3% of the population having a formal credit card. Traditionally, the Indian customer is generally averse to using credit cards and uses them conservatively. Major players in the ecosystem along with emerging FinTechs are working towards changing this scenario by introducing various product developments and spreading awareness about using credit cards in daily transactions.