As per recently-released RBI data, Indians are spending more than before through credit cards even as fewer hold such cards now than last year. Given their losses from defaults were higher than the global average in the aftermath of the 2008 global recession, banks in India cut the issue of credit cards, bringing the number of card-holders down to 17.8 million by 2011 from 28 million in 2008. Banks became cautious in issuing new cards after the mounting delinquencies of the slowdown years and focussed instead on existing accounts.
What has helped is the boom in digital payments in India. According to the Internet and Mobile Association of India, such payments are expected to reach R1.2 lakh crore by the end of the year, 40% higher than in 2013. Credit cards will make up 21% of this while the rest will come from debit cards and internet banking. This has a lot to do with the fact that e-commerce has picked up over the last couple of years. At the same time, consumers are using plastic money for purchases at brick-and-mortar stores at a higher volume and frequency than before. It also helps that payment options in many segments, such as EMIs for consumer durables, are often facilitated by plastic money. Given how India stands at the cusp of mobile-led digital revolution, banks must figure out how to capitalise on the digital payment swell, say, with apps and mobile wallets in tie-ups with telcos.