Rising credit card dominance: Debit cards decline in India’s payment landscape


– Rising credit card transactions and spending are eating into the market for debit cards, which are both declining in the volume and value of transactions.

Credit spending jumped 47.4 per cent in FY23 to ₹14.32 lakh crore, with the number of transactions rising to 291 crore from 224 crore in the previous year, as per data from RBI’s Handbook of Statistics on the Indian Economy for FY23.

On the other hand, debit card spending fell to ₹7.19 lakh crore from ₹7.30 lakh crore in FY22 on the back of the number of transactions declining from 394 crore to 342 crore.

Shifting trends since the pandemic

Both debit and credit cards were seeing steady increases in their volume and value of transactions till FY21 when transactions and spending fell due to curbed spending during the pandemic. Barring FY21 credit card spending has been higher than debit card every year since at least FY19, as per the data.

Credit card preference on the rise

Post covid, debit card spending and transactions have been gradually declining whereas credit card transactions are rapidly gaining market share–largely on the back of increased customer preference for credit cards due to the additional rewards and cashback offered.

Spending statistics

Credit cards in force as of March 2023 were at 8.5 crore, up 15.9 per cent for the year. Total credit card spending in FY23 was ₹14.3 lakh crore, 47 per cent higher on year, as per the latest RBI data.

Factors driving usage

AU Small Finance Bank MD and CEO Sanjay Agarwal, at the sidelines of a recent event, had said that in addition to increased credit adoption and PoS (point-of-sale) affordability such as EMIs, higher credit card spending is also being driven by convenience, utility and increased awareness about such cards.

Total credit cards in force stood at 8.99 crore at the end of July, with net card additions in the range of 9-12 lakh per month. Monthly credit card spending has remained over ₹1 lakh crore mark for nearly 1.5 years, touching a record high of ₹1.45 lakh crore in July.

In comparison, 97 crore debit cards were outstanding as of July 2023, with transactions worth ₹53,313 crore being processed.

UPI emerges as strong competitor

Debit cards have seen a significant decline in usage, especially for small-value transactions, following a surge in the use of UPI (Unified Payments Interface) for peer-to-peer (P2P) and peer-to-merchant (P2M) transactions.

UPI’s milestone

The UPI network breached the milestone of 1,000 crore transactions per month in August 2023, processing a record 1,058 transactions worth ₹15.76 lakh crore during the month.

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