1. Credit card landscape over the last 5 years

The credit card landscape has changed substantially over the last five years. Cards in force (CIF) have grown at a CAGR of 25% during this period.

No. of cards (in millions)

Credit card spends have been higher than debit card spends despite the number of debit cards (~900 mn) being 16 times higher than the number of credit cards (~ 55 mn). Credit card spends have grown at 33% CAGR over the last five years

Spends (in billion INR)

Significant growth in card acceptance infrastructure. Propelled by NFC & QR-based acceptance points. Acceptance locations have seen a CAGR of 39% for six years.

2. Future of credit cards in India

Credit cards are accelerating and cards in force (CIF) are expected to double to 100 mn by 2023; consequently, volumes are also expected to double in the coming years.

Despite the growth, the penetration of credit cards has been pretty low, with only threein 100 people having a credit card. Though we are significantly behind the leader, the USA, a developed nation, what's surprising to fathom is that we are also behind emerging markets players like Brazil at 73%, China at 42%, and Indonesia at 7%.

The other reason for low credit card penetration is the high cost that is incurred in setting up a credit card. These costs include customer acquisition cost which involves giving freebies to customers on joining, risk absorption, logistics, and other paperwork costs.

Credit card growth: There are many ways in which credit card adoption can be increased by banks and fintech firms

1. Partnership: Partnerships with organisations leveraging their distribution and acquiring capabilities. co-branded cards, partnering with everyone from ride-hailing apps to petrol pumps. These serve as good tools to drive spends and also massively reduce the cost of underwriting for financial institutions.

2. Merchants: As the innovations around contactless and mobile PoS enter the mainstream, customers will see more advantages in maintaining a credit card, and hence growth in acceptance infrastructure and merchant tie-ups will be significant growth drivers.

3. Digital payments: The growth of digital payment platforms has helped in increasing not only debit card penetration but also the number of people using credit cards for their expenditures. The drivers for credit card growth will be greater organised retail spending and deeper penetration of e-commerce players into Tier II and Tier III cities. And the growth of 'contactless delivery' will spur growth in credit card ownership.

4. New form factors: In a recent report, by Research and Markets, as of March 2020, India, alongside China, accounted for the highest fintech adoption rate (87%), out of all the emerging markets in the world. Hence, the cards in their current form of "plastic in the pocket" will see a transformation to more virtual and digital forms. And the key growth driver for future cards will be adoption and innovation to these new form factors. The key to continuing this growth would be to tap the potential of this ever-growing credit market through customizing product construct and seamlessly catering to the increased demands and expectations of consumers while still being able to efficiently manage risks.

Projection of cards: (This projection was done in 2019, before the Covid-19 pandemic)

Vijay Jasuja is consultant, Credit Card, PNB. He was former MD & CEO of SBI Card.