New Delhi: The credit card sector in India is poised to witness a significant expansion, with projections indicating that the number of credit cards in circulation could surpass 200 million, marking a Compound Annual Growth Rate (CAGR) of 15 percent, as highlighted in a report by PricewaterhouseCoopers (PwC).
The aforementioned report delineates that the credit card industry has undergone substantial growth, doubling the volume of credit cards issued over the preceding five years. This momentum is anticipated to persist, with the market expected to mirror this growth trajectory in the forthcoming years, the report notes.
"It is projected that the credit card market in India will more than double its card base by the fiscal year 2028-29, reaching a staggering 200 million cards. The industry, which has experienced a 100 percent increase in the issuance of credit cards over the last five years, is poised to replicate this growth in the next fiscal year," the report states.
In conjunction with the surge in credit card issuance, the report highlights a notable increase in transactional activity within the credit card industry. Transaction volumes have witnessed a growth of 22 percent, accompanied by a surge in transaction values by 28 percent. The report attributes this growth to the introduction of new products, innovative offerings, and the expansion into new customer segments.
However, the report also acknowledges a decline in the usage of debit cards. Both the volume and value of debit card transactions have seen a decrease, reflecting a shift in consumer preferences. In the fiscal year 2023-24, the volume of debit card transactions declined by 33 percent compared to the previous year, and there was a corresponding 18 percent decrease in spending on debit cards year-on-year.
The report attributes this decline to the increasing popularity of the Unified Payments Interface (UPI), which is lauded for its ease of use and has emerged as a favored payment method for small to medium-sized merchants due to its absence of a Merchant Discount Rate (MDR).
"This decline in debit card usage can be attributed to the growing preference for UPI, characterized by its ease of use, and the preference of small to medium-sized merchants for UPI due to its 0 per cent MDR," the report states.
Furthermore, the report notes that debit cards have faced challenges in competing with credit cards in terms of rewards, a factor that has contributed to their decline. The lack of appealing reward programs and a reduced awareness of the benefits associated with debit cards have made them less attractive to consumers.
On the other hand, digital payments in India continue to flourish, with transactional volumes increasing by 42 percent year-on-year in the fiscal year 2023-24. This trend is expected to triple by the fiscal year 2028-29.
The report suggests that the ongoing growth in digital payments is fueled by a variety of factors, including innovations by participants in the payment ecosystem, the introduction of new business models, technological advancements, and an increase in customer awareness.
