UPI and personal loans are replacing credit cards in Indians’ wallets: CIBIL

Despite improved repayment behaviour and positive trends supporting consumer lending, credit card penetration in India is low compared to many other developing countries.

India has 5.2 crore credit cardholders, which is just 25% of the overall credit-active population of about 25 crore, Bhavesh Jain, TransUnion CIBIL MD and CEO said, adding that developed and developing countries have a higher proportion of credit card users.

A white paper prepared by the credit information company said the same proportion stands at 62 per cent in Columbia, 98 per cent in Hong Kong, 81 per cent in the USA and 70 per cent in the UK.

Jain also pointed out that credit cards are playing a smaller role in bringing first-time borrowers into the formal credit system. “Only 8% of new credit card issuances are to first-time borrowers, down sharply from 26% a year ago.”

Here’s a look at the key findings from the whitepaper:

Over the years, credit cards — which are mainly used for consumption — have ceased to be the dominant unsecured product in a customer’s wallet, it said, noting that there are alternatives such as Unified Payments Interface, personal loans, etc., which it competes with.

At present, a merchant discount rate of up to 2% is charged for each credit card transaction, while there are also sweeteners, such as reward points, that users enjoy.

Also, at present, a user cannot add credit cards from other networks, such as Visa and Mastercard, to UPI apps, which restricts usage to the state-promoted RuPay.

The last decade has witnessed growth across many numbers, including outstanding balances up 8.3x to ₹3.1 lakh crore, consumer holding cards up 3.6x to 5.2 crore, and the number of cards up 5.1x to 10.7 crore.

The number of people holding three or more credit cards in their wallet has grown to 22 per cent from 12 per cent a decade ago, it said, adding that live cards’ share in consumption loans has decreased to 38 per cent from 56 per cent in the same timeframe.

The younger population is more likely to own a credit card, but the interesting aspect is that, from a geographical spread perspective, such cards have now ceased to be a metro phenomenon and are also owned by semi-urban and rural populations, Jain said.