India’s Digital Payment Boom: Credit Card Spending Surges, UPI Leads the Charge

New Delhi: India has witnessed a significant surge in credit card spending, as the total spending crossed Rs 2 lakh crore in October, according to the latest data released by the Reserve Bank of India (RBI).

This marks a robust 14.5% increase from the previous month, highlighting strong consumer confidence and spending behavior during the festive season.

RBI Reports 13% Year-on-Year Growth in Credit Card Spending

The RBI’s data shows that credit card spending in October 2024 reached an impressive Rs 2.02 lakh crore, a 13% year-on-year growth from October 2023. This marks a remarkable upward trend in credit card usage across the country, driven largely by seasonal spending, promotions, and the ongoing rise in digital transactions.

As the festive season boosted consumer demand across various sectors, credit card usage has surged, and experts attribute this to the increase in promotional schemes such as equated monthly instalments (EMIs) that make larger purchases more manageable. The increased spending also reflects the broader shift towards digital payments in India.

Rising Number of Credit Cards in Circulation

According to the RBI data, the number of credit cards in circulation has also seen a sharp rise. In October, the number of outstanding credit cards in India increased by 12.85%, reaching a total of 106.88 million, up from 94.72 million in the same month last year. This increase is indicative of both the growing adoption of credit cards and the country’s expanding credit infrastructure.

Leading the market in issuing new credit cards were major players like HDFC Bank, SBI Cards, and ICICI Bank. HDFC Bank issued 241,119 credit cards in October, followed by SBI Cards with 220,265 cards, and ICICI Bank with 138,541 cards. These institutions continue to dominate the Indian credit card market, contributing to the overall rise in credit card spending across the country.

Surge in UPI-Based Digital Payments

While credit card usage continues to rise, the Indian digital payments ecosystem is seeing an even more significant transformation, largely driven by the Unified Payments Interface (UPI). UPI has revolutionized digital transactions in India, leading to a dramatic increase in the share of digital payments.

The share of digital payments has more than doubled from 14-19% in March 2021 to an anticipated 40-48% in March 2024, according to RBI data. This is a remarkable shift in consumer behavior, as UPI continues to dominate digital transactions across the country. UPI’s growth has been nothing short of phenomenal, with a Compound Annual Growth Rate (CAGR) of 75% in transaction volume and a 68% CAGR in UPI spends between August 2019 and August 2024.

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Despite the rise of UPI, debit card transactions have seen a decline, dropping almost 8% from Rs 43,350 crore in August to Rs 39,920 crore in September. This shift highlights the growing preference for UPI payments, particularly due to its convenience and the absence of transaction fees for most users.

Credit Card Spending Shows Continued Growth Amidst UPI Dominance

In contrast to the slowdown in debit card usage, credit card transactions continue to show healthy growth. In September 2024, credit card spending in India reached Rs 1.76 lakh crore, a nearly 5% increase from Rs 1.68 lakh crore in August 2024. While UPI remains the dominant mode of transaction in terms of volume, credit card spending continues to rise, driven by higher-value purchases and the festive season’s impact.

The transaction volume ratio between UPI and credit cards is staggering, with UPI transactions currently outpacing credit card transactions by 38.4 times. However, the lower average ticket size of UPI transactions means that the value of UPI-to-credit card spending is at a stable 0.3 times, as per recent reports from Axis Securities.

The Future of Credit Cards and UPI in India

India’s digital payment landscape continues to evolve rapidly, with UPI expected to maintain its dominant role. However, credit cards remain a key player in India’s financial ecosystem, particularly for high-value purchases and for consumers seeking to avail themselves of credit for large transactions. With the combined growth of both UPI and credit cards, the future of digital payments in India looks promising.

Experts predict that the continued growth in credit card spending and the proliferation of digital payments will lead to a more seamless, cashless economy. As the adoption of digital payments rises, both UPI and credit cards are set to complement each other, offering consumers various options for making payments.

Conclusion: A Strong Outlook for Credit Cards and Digital Payments in India

In conclusion, October 2024 saw a remarkable milestone for credit card spending in India, crossing the Rs 2 lakh crore mark. This growth, driven by the festive season and the rise of digital payments, underscores a significant shift in consumer spending habits. With UPI continuing to dominate in transaction volume and credit cards showing robust growth, India’s digital payment landscape is set for further transformation, promising greater financial inclusion and convenience for consumers across the country.