Credit Card Future in India: What's in Store?

Credit cards have established themselves as a fundamental component in the daily lives of millions of Indians. India witnessed a sharp rise in the use of credit cards by 15% in April 2023 with respect to April 2022, according to a survey conducted by the Reserve Bank of India.

With the evolving needs of consumers, the forthcoming changes in the landscape of credit cards are poised to bring about exciting transformations. Explore the credit card future in India!

Credit Card Trends: A Walk Through

The Indian credit card industry is on the verge of a major transformation. Here are some of the most important trends that are reshaping the Indian financial landscape of credit card future in India:

• Contactless payments and NFC technology, catering to faster, secure transactions.
• The increase in the use of mobile banking apps is raising the demand for virtual credit cards, which enhances the convenience of online transactions.
• Integration of biometric authentication to counter the growing threat of cybercrimes.
• The growing popularity of 'Buy Now, Pay Later' (BNPL) options, offers flexible payment plans with zero interest.
• Credit card users can link their cards to smartwatches for added transaction convenience.
• Utilisation of chatbots, AI-powered customer service and virtual assistants for instant responses to customer queries 24x7.
• Providing financial education and wellness features to focus on tools and resources which enhance financial literacy and management.
• Customised credit card offers based on individual preferences, including travel perks, cashback, and dining discounts.

Growth of Credit Card Use and Transactions

The surge in credit card use in India, as indicated by Reserve Bank of India (RBI) data, reveals a notable growth trajectory. With over 8.6 Crore credit cards in April 2023, marking a 15% increase from the previous year, the figure is anticipated to reach 10 crore by early 2024.

This upswing can be attributed to a burgeoning ecosystem fostered by collaborative efforts among banks, card issuers, and fintech companies. To attract new users, credit card providers offer incentives such as cashback options and perks for a modest annual fee.

Also, the integration of credit cards with the United Payments Interface (UPI) emerges as a crucial factor shaping the credit card future in India. UPI's dominance in the payment landscape, with a record 9.41 billion transactions in May, sets the stage for a substantial increase in credit card acceptance.

Credit Card Users in India

In the fiscal year 2022, India witnessed the issuance of approximately 73 million credit cards, reflecting a consistent upward trend in cumulative card numbers. Notably, the credit card market rebounded swiftly from the decline experienced during the lockdown from March to May 2020.

The adoption of credit cards in India gained prominence following the market liberalisations of the 1990s and the subsequent diversification of the banking sector. As of 2022, the financial landscape comprised around 78 banks, encompassing public, private, and foreign entities, alongside numerous smaller cooperative and regional rural banks.

It is noteworthy that India's credit card prevalence, as of 2020, ranked 11th globally in terms of the total number of cards in circulation. This contextualises the credit card future in India and underscores the impact of economic reforms and banking sector diversification on the proliferation of financial instruments.

Growth of Fintech Credit Cards

Fintech are shaking up the future of credit cards in India, riding the wave of "Digital India" and rising urban spending. Unlike traditional banks, they don't issue credit cards directly. Instead, they partner with banks or NBFCs to obtain credit limits, which they then utilise to issue co-branded prepaid cards.

These cards offer a unique value proposition: tempting cashback, referral bonuses, and discounts for everyday purchases like food delivery, mobile recharge, bill payments, etc.

Also Read - What is the Minimum CIBIL Score Required for a Credit Card?

Credit Card EMIs

In the era of digital payments, credit cards offer seamless cashless transactions. Credit card EMIs convert outstanding balances into monthly instalments, resembling personal loan structures.

This option suits those unable to clear their credit card bills at once, allowing partial payments with added interest. It provides a flexible and structured approach to managing credit card obligations, catering to diverse preferences and financial situations.

Also Read - Do's and Don'ts of Using a Credit Card

Different Ways to Boost Credit Card Growth

To drive the growth of the credit card future in India, banks and Fintech companies can employ various strategies:

• Strategic Partnerships: Collaborating with colleges and organisations helps expand the customer base, reducing acquisition costs and minimising recovery concerns by targeting clients with favourable repayment likelihood.
• Co-branded Cards: Forming alliances with brands, such as gas stations, for co-branded cards, enhances customer loyalty through reward points and discounts.
• Point of Sale Innovations: With the rise of contactless and mobile Point of Sale (PoS) systems, businesses are expected to accept more credit cards, making it advantageous for customers to hold credit cards.
• Legal Framework Enhancement: Beyond traditional marketing, initiatives like credit card management education and e-signatures contribute to increased awareness, facilitating low-cost and low-friction customer onboarding for banks and Fintech organisations.

To Conclude

The credit card future in India is undergoing a dynamic transformation driven by technological advancements, evolving consumer needs, and strategic collaborations. The surge in credit card usage indicates a vibrant and expanding credit ecosystem.
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