Youthful Indian Consumers Drive Surge in Credit Card Transactions

Despite regulatory constraints on certain business payments via credit cards, transactions witnessed a robust 30% year-on-year increase in January. Experts attribute this surge to the attractive rewards and repayment terms offered by banks.

Data from the Reserve Bank of India (RBI) revealed that credit card transactions soared to ₹1.7 lakh crore in January from ₹1.3 lakh crore a year earlier. In terms of volume, transactions spiked by 26%, reaching 330 million from 260 million during the same period.

Ecommerce transactions and bill payments accounted for over half of the total transactions, with younger consumers leading the charge. This demographic also benefited from features like equated monthly instalments (EMIs) and ‘buy now, pay later’ (BNPL) schemes.

Interestingly, the increase in card spends occurred despite the RBI’s imposition of higher risk weights on unsecured loans, including outstanding credit card balances.

V Balasubramanian, CEO of Financial Software and Systems, noted that this trend reflects a transition towards a consumption-driven economy, with younger generations driving credit card ownership and spending, particularly on ecommerce platforms.

Ecommerce platforms saw a significant 37% year-on-year surge in transactions in January, representing 65% of total card spends. Features like BNPL and EMI schemes further incentivized card users to make purchases and repay in instalments.

Chitrabhanu KG, country head of retail assets and cards at Federal Bank, highlighted the role of the digital ecosystem in facilitating increased card usage. The evolving merchant ecosystem, coupled with the availability of credit on UPI, has contributed to more merchants adopting card-based payments.

Overall, the surge in credit card transactions underscores the growing preference for digital payments among Indian consumers, especially the younger demographic.