A

Average credit card spend increases 42% in two years

Mayur Shetty, TNN | Jul 23, 2013, 03.42AM IST

Average monthly spend per credit card has jumped 42% to Rs 6,322 from Rs 4,462 two years ago.

MUMBAI: If there is one business that has defied the slowdown, it is credit cards. Average
monthly spend per card has jumped 42% to Rs 6,322 from Rs 4,462 two years ago. Banks
attribute the rise primarily to a payment innovation termed 'EMI at POS', which enables
manufacturers and retailers to sell smartphones and consumer durables under monthly
instalment schemes without their taking any credit risk or the buyer bearing any interest
cost.
Total spending on credit cards increased 57% to Rs 12,380 crore in May 2013 from Rs 7,880
crore in May 2011. Part of this is due to the card industry returning to growth after four
years and the number of credit cards rising to 1.95 crore from 1.76 crore. "It is consumerism
that is driving the size of transactions with the introduction of equated monthly instalments
at point of sale by merchants and original equipment manufacturers," said SBI Cards CEO
Pallav Mohapatra.

Manufacturers are targeting young people with relatively lower incomes through EMI
schemes to expand the market as well as clear inventories, particularly for expensive
products such as smartphones. While manufacturers are prepared to get their payments in
instalments, they do not have the wherewithal to assess credit worthiness or recover
payments. "In the case of EMI at POS, the merchant or the manufacturer bears the interest
burden but if the cardholder defaults, the risk is borne by the credit card issuer," said
Mohapatra.
Card companies have been offering customers the option to convert some of the large
purchases into consumer loans which can be repaid in instalments over some years. But the
response has been lukewarm as Indian consumers are interest-averse with almost 80%
choosing to repay their entire bill by the month-end instead of rolling it over.
"In recent years, several new entities have started accepting card payments. These include
insurance companies and government utilities. But the biggest driver for increase in size of
transactions has been the zero-interest EMI option," said Visa's country manager Uttam
Nayak. Visa has been aggregating hundreds of high-value billers across the country, from
LIC to electricity, gas, telecom, and water utilities where bills can be viewed and paid
online.
Another driver is that banks are getting innovative with their rewards programmes. For
instance, the Citibank PremierMiles credit card, which targets air travellers, offers reward
points which work as a virtual currency as they can be used for airline tickets, hotels and car
rental services. "Providing such an innovative proposition drives card preference among
engaged customers, thereby increasing the value of spends. Cardholders can now choose
what they want to buy using their reward pointsbe it a big purchase such as an airline
ticket or smaller expenses like fuel, apparel or books. With over 65,000 Instant
Redemptions per month, this has become the most popular way for redeeming reward
points among Citibank customers," said Muge Yuzuak, head of cards and personal loans,
Citi India.
"Spends growth on StanChart's credit cards portfolio has leapfrogged to around 30% levels
in 2013, powered by a slew of successful consumer promotions in growing discretionary
spend categories like smartphones, continued focus on nurturing strategic merchant
alliances, and a steady growth in card activation rates from the existing base of customers.
Overall, spends have been growing at a healthy 25% or so. It's great to see a number of other
industry players driving the ecosystem forward," said Rajashree Nambiar, general manager,
retail banking products, at Standard Chartered Bank.
Card companies are today in a much better position to extend credit than they were five
years ago. First, there has been a dramatic fall in wilful defaults as customers realize that a
bad credit record with a credit information bureau is worse than saving a few thousand

rupees by refusing to pay. Secondly, banks have learned their lessons after 2007 when
defaults in personal loans peaked; instead, they now issue cards largely to their own
customer base.
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The Future of Credit Cards in India

by MANSHU on AUGUST 15, 2010
in CREDIT

The following is a guest post by Michael from CreditCardForum.com.

He has conducted hundreds of credit card reviews for his site (his
favorite being cash back credit cards) and has been analyzing the credit
industry for years. Today, he will be discussing the international
growth of credit cards and where he believes India will fit into the
picture.
One of the most lucrative investments ever made by Warren Buffett was
in the Coca-Cola company. In 1988, he began gobbling up their stock. At
the time, Wall Street thought he was insane; the consensus was that
Coca-Cola had already saturated America and other Western countries,
so there was no room left to grow. It was considered to be a fully mature
company.
Buffett saw things differently. Even though the Western markets were
already saturated, he realized that many international markets were
largely untapped that is where the future growth would be. So he
bought $1.02 billion of their stock, which worked out to be 7% of the
company at the time.
Well as it turns out, Buffett was right. Over the next twenty years growth
flourished overseas. Today, Buffetts stake in the company is valued
at around $11 billion and pays nearly a quarter-billion a year in
dividends alone!

What does Coca-Cola have to do with credit cards?

Its astonishing just how quickly debit and credit cards have become
of the payment method of choice in America. Nowadays, people pay for
just about everything using them. Personally speaking, I probably only
use cash five or six times per year, and credit cards the rest of the time.
In todays fast-paced, technologically driven world, we are seeing
plastic replace paper currency at a rapid rate.
I see this situation as being similar to Coca-Cola in 1988. Today, Visa,
MasterCard, American Express, and Discover have already conquered
America but what about internationally? In the majority of the world,
debit cards and credit cards are still a rarity, but thats quickly
changing. The aforementioned companies are seeing double-digit annual
growth rates overseas. Not surprisingly, it is the technologically-savvy,
growing countries like India where credit card usage is
increasing the most.
What will the future hold for credit cards in India?
China and India are the two most populous countries, with 1.34 and 1.18
billion people, respectively. Although the populations are similar in size,
last year the Chinese spent nearly $24 billion on credit cards, which is 12
times more than the $2 billion spent in India. However this difference is
rather insignificant at such an early stage, since both figures still only
represent a trivial fraction of each countrys economy.
In order to gauge where India is heading we must consider the following
factors:
Past Growth Rate: According to the Indian research firm RNCOS, the
country saw a CAGR of around 40% between FY 2006 and FY 2009 for
credit cards.
Short Term Future Growth: The aforementioned firm predicts a
CAGR of 20% between FY 2011 and FY 2013. According to their press
release the payment card market is highly untapped and is still

at its nascent stage due to a very low level of penetration in terms of

payment card usage.
Long Term Future Growth: The biggest obstacle facing long term
growth will be infrastructure. According to the RBI, approximately 40%
of citizens still do not have a bank account. Increased adaption of
banking will be a key component in how quickly card usage is adapted.
Furthermore, businesses will need to have greater ability and the
willingness to incorporate debit/credit card processing. Lastly and
most importantly society must also be willing to adapt the transition
from paper to plastic.
Government Participation: One factor we can be relatively confident
in is that the government has and will continue to be supportive of the
card industry. The RBI has proposed launching domestic payment card
and a POS network for card payments.
How I believe credit cards will be different from those in the
United States
Nowadays, just about every credit card in the U.S. offers cash back,
points, or some other form of rewards on purchases but it wasnt
always that way. During the 60s, 70s, and 80s, rewards
were almost non-existent and most credit cards even charged an annual
fee. It wasnt until the American market started approaching full
saturation that we saw cash back credit cards, travel rewards credit
cards, and other gimmicks offered by banks to try and stand out
from the competition. In summary, these extra perks would probably not
be offered if the market wasnt so competitive. For that reason, I do
not believe we will see Indian credit cards offering widespread rewards
for many years (the market first must become much more saturated).
There is also the possibility that we may never see such lucrative credit
card rewards programs in India. Why? Because there are only two

reasons its possible for banks to give 1% to 5% cash back on

American credit cards:
(1) Credit card companies charge merchants processing fees, which
average 2% and higher. These fees help cover the costs of the rewards.
Many countries crack down on these fees and limit the amount
merchants can be charged. For example, the Royal Bank of Australia
capped these fees at only 0.5% in 2003. If India were to also drastically
cut the fees, rewards would be far less likely.
(2) In the United States, the savings rate is very low. Since the recession
it is historically high at 6%, but usually it is even less than that.
Compare this to a country like India, where the savings rate is around
30%. Because Americans have so little money saved, many do not pay
their credit account in full each month or they use credit cards for
balance transfers both of these forms of borrowing involve paying
interest payments and/or transfer fees. That, in turn, also helps to offset
the banks expense of offering rewards. However in a country like India
where savings is high, I expect the population will generally be less likely
to use this expensive type of borrowing. Therefore, it may not be
profitable for banks to offer cash back credit cards and the like.
Conclusion
In my personal opinion, I believe the credit card business today is very
similar to where Coca-Colas business stood in 1988 there are
massive untapped growth opportunities. Although Indias current
infrastructure may not be considered the most ideal for the adaption of
card payments at this time, I believe they are well poised. As a country
that highly values science and technology, I am confident their usage of
card payments will become widespread. Its not a question of if, but
when.
inShare

lthough this article looks full of detail, a bad underlying mistake has been made. The credit card in
India may grow once the society has reached a certain degree of maturity. Unfortunately, this is
highly unpredictable (1) because as a cash-based society there is high aversion towards debt (credit
cards are perceived as such) (2) debit cards have been experiencing a relentless growth that is highly
unlikely to stop. Forecast may be wrong or right (not questioning that) but data displayed here is
wrong in the first place. Credit cards declined by 6% and 10% in terms of value and volume
transactions, respectively (2008-2009). In the same time span, debit cards rose by 38% and 42%
(value and volume transactions). Dont know where you got this data but I work in research and
within these markets. Data released in a such a unsubstantiated way is misleading and
counterproductive for researchers who take everything for founded. Not picking on the writer but the
firm that made this data publicly available.

While the latest RBI data disclose that the number of credit cards has shrunk, spending
through cards has shown a marked improvement. The total number of outstanding
credit cards has fallen from a peak of 2.7 crore in 2008 to 1.75 crore as in last February.
The same trend is visible in data for the 11-month period of 2011-12, where the number
of outstanding cards for the industry was 1.75 crore against 1.77 crore till April 2011, a
reduction by 1.12 per cent.

Rise in credit & debit cards spending signals India's

transformation into a cashless economy
Malini Goyal, ET Bureau Oct 6, 2013, 06.30AM IST

Barclays(The economy is sluggish.)

For Vijendra Rawat, 42, it has been a long journey from cash to card. When he started working in the
early 1990s, almost all his expenses were in cash. Debit cards were not that popular then and the credit
card was still a very niche product. It did not help that very few outlets - from grocery to milk to utilities willingly accepted card payments. It is different today.

In close to two decades, Rawat - now a Delhi-based businessman - barely deals with cash and cannot do
without his cards. He owns two credit and two debit cards and with time has figured out the best way to
use them. He uses his debit card mostly as an ATM card to withdraw cash.
For almost all his expenses - from buying milk, petrol to even consumer electronics and durables - he
uses his credit cards. He rarely shops for any big-ticket items between the 1st and 11th of the month. "I
want to enjoy the full month's credit period," he says. And he never revolves his credit, settling his credit
card bill at the end of every cycle. "If I cannot pay I do not buy. Simple," he says.
Yes the economy is sluggish. Credit offtake has slumped. And consumer sentiment is low. Yet, electronic
cards debit, credit and pre-paid cards are posting robust growth. Between 2007-08 and 2012-13,
the number of cards issued (except credit cards) has risen. From a small base of around 150 million in
March 2008, electronic cards are nudging the 400-million mark today.
More impressive is the secular growth in volume and value of transactions. Credit card spends (in value
terms) have more than doubled to Rs 1.23 lakh crore despite a dip in the number of credit cards between
2007-08 and 2012-13. And debit card spends (in value) have risen six times to Rs 74,400 crore during the
period. The number of processing terminals too has doubled to 9.5 lakh in these five years. "Where is the
slowdown? Our business is doing well. We are upbeat," says Uttam Naik, head (South Asia), Visa Group.

India's credit card base at five-year high

Worldline India estimates credit card base at 20.3 million in FY14
BS Reporter | Kolkata
April 4, 2014 Last Updated at 18:28 IST

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India's credit card base may have topped 20 million in the just concluded 2013-14
(April-March) financial year - its highest level in the past five years -according to
Worldline India, which provides services for critical electronictrans actions in the
country.
Worldline India estimates that the credit card base increased by around four% to20.3

million during the year. This will be the second consecutive year of growth in credit card
base with banks now appearing more confident to expand their unsecured retail loan
portfolios.
"A second consecutive year of growth is encouraging, though the growth rate is likely to
be slow in the short-term as the large issuers remain focused on profitability and will
continue weeding out cards with lower activity," Deepak Chandnani, chief executive
officer of Worldline India, said.
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While the Reserve Bank of India (RBI) publishes data on cards, those statistics are
released with a lag. The latest data released by the central bank showed therewere 18.8
million credit cards in the country at the end of November, 2013. HDFC Bank remained
the largest issuer of credit cards with a base of 5.1million cards. While Worldline India
expects HDFC Bank to remain the largest issuer in 2013-14, it expects the bank's share
in the issued base to fall to 27% from 33 percent earlier. "ICICI Bank, State Bank of India
(SBI) and Axis Bank have each grown their share by two%, growing faster than their
competition," Chandnani said.
Worldline India also estimates that over 58 million debit cards were added during 201314, the highest ever in a year. It expects the debit card base to have touched 389
million at the end of March, 2014 compared to 331 million a year earlier.

Urban indias ownership of credit

cards increases as income rises
In the higher income categories of Rs.20 lakh and above, the average
ownership is around 62%.
Indicus Analytics

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First Published: Thu, Oct 11 2012. 06 25 PM IST

Ramesh Pathania/Mint

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The Indian Financial Scape survey, conducted by Delhi-based economics research firm Indicus
Analytics, tracks patterns of financial asset ownership of urban India. In its sixth issue, we look at
credit card ownership. The data is split across income groups and regional variations. At least
35,000 households were surveyed across urban India over the period April-June 2012. At the end of
nine weeks, the survey will reveal what drives financial asset ownership in urban India. Data on
credit cards shows that as urban household income increases so does the ownership of credit cards.
In the lowest income category of upto Rs.75,000, the average card holding is less than 1%. It rises
to just under 5% in the next income bracket of income upto Rs.5 lakh. In the higher income

categories of Rs.20 lakh and above, the average ownership is around 62%. If we look at zone wise
card ownership, the western region is again ahead of its peers in credit card ownership as it has
been with other financial products, with average ownership of almost 30% compared with just over
26% in the east, north and south.

Key takeaways:
1. The pan-India ownership of credit cards for urban households is at 27.65%.
2. In the lowest income group of below Rs.75,000, the average ownership is below 0.63%.

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First Published: Thu, Oct 11 2012. 06 25 PM IST

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Accept Credit Cards

Credit Problems

Debt Problems

Financial Problems

Loan Credit

If you know how bad credit happens, you may be able to avoid the mistakes that will ruin
your credit score.
Two things lie at the root of almost all credit problems: taking on too much credit:
borrowing more than you can afford and failing to repay your debt according to the

terms. Even knowing that, credit problems can sneak up on you because you may not
realize youre taking on too much or that youll fall far behind on your credit payments.
Here are some ways that credit problems happen and things you can do that lead to bad
credit.

1. Opening a credit card before youre ready

There are certain things you need to do toprepare for a credit card. Understanding
money, being able to budget, and having a steady income are a few prerequisites for
opening a credit card. You also need to be responsible enough to maintain a balance
you can afford and to make your payments each month. The credit card issuer will only
require you to have regular income and sometimes a good credit history. Learning the
other key principles of credit card readiness is up to you.
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2. Opening more credit cards than you can handle

For beginners, one credit card is enough. Making more money doesnt mean you can
necessarily handle more credit cards. Managing multiple credit cards requires discipline
and organization. Youll have to keep track of your balances, available credit, payment
amounts, and multiple due dates all while paying your other bills and making sure youre
not creating more debt than you can handle. Its indeed a juggling act and if you cant
handle it, you may end up in debt and unable to afford your credit card payments.

3. Taking on more financial obligations than you can afford

Your monthly income can only accommodate a certain amount of expenses. When
those expenses exceed your income, youll run into problems. You may unknowingly
take on more than you can afford because youre not reasonably or completely
considering your income and current expenses before you agreeing to a new recurring
expense. If your monthly expenses are too high for your income, credit problems are
inevitable.

4. Avoiding financial issues

Running from problems is never a good solution and will almost always make things
worse. If youre having money problems, face them. Take a good look at what money
you have and what expenses you have to pay. Figure out which expenses you can get
rid of to make it easier to afford your necessary expenses. If you ignore financial
troubles when all the signs are right in your face, it will only get worse.

5. Neglecting non-credit payments

Credit cards and loans are reported to the credit bureaus each month. Other payments,
like cell phone and utility payments, arent reported regularly. But that doesnt mean you
can pay these late or completely neglect them. If youre skipping payments, its a sign of
a bigger issue that could eventually impact your credit card payments if youre not
careful. Not only that, defaulting on any type of payment obligation can impact your
credit since unpaid balances are often sent to a collection agency not too long after you
fall behind.

6. Withholding payment in retaliation to your creditor

Some people think that withholding payment from their credit card issuer is the solution
to credit card disputes. Unless you follow a specific process, withholding payment will
hurt you and not your card issuer. The Fair Credit Billing Act gives cardholders the right
to dispute credit card billing errors within 60 days. Youre allowed to withhold payment of
the disputed charges while the credit card issuer investigates. Otherwise, you must pay
up if you want to save your credit. Skipping payments under and other circumstance will
lead to late payment entries on your credit report.

7. Failing to adjust/evaluate spending after major life changes

Getting married or divorced, having a baby, relocating to a new city, losing your job,
taking a pay cut, and buying a house are all situations that can majorly affect your life
and your expenses. When you experience major life changes, its important to
reevaluate your spending to ensure your income will still cover your expenses. You may
need to cut some expenses so all your spending will comfortably fit your income.

8. Taking on credit or loan products you dont understand

Adhering to the terms and conditions of your credit cards and loans is key to keeping
your account in good standing. A 2013 study from J.D. Power and Associates reveals
that only 47% of credit card customers completely understand their credit card terms. If
you dont understand your credit card or loan, youre more likely to make critical mistake.
Credit problems develop over a period of time, which can make them hard to miss.
Continually monitoring your payment and spending habits is the best way to recognize
earlier that credit trouble is looming.

Apr 10, 2015, 07.07 PM IST | Source: Moneycontrol.com Product innovations on your card:Credit card or army knife?
Credit cards are becoming popular as online shopping catches up. To deal with issues such as security, ease of use
the credit cards are now coming in multiple avatars which further empowers the end users. ADHIL SHETTY CEO,
BankBazaar.com More about the Expert... 7 0Google +0 0 Adhil Shetty BankBazaar.com Remember the one thing
you cannot do without while on vacation exploring dusty trails and jungle lodges? Thats right, your all-in-one Swiss
Army Knife. It cuts, snips, punctures, screws, uncorks, and does a zillion other things that would give an army man a
run for his money. Enter the Swiss Army Knife of the plastic money kind the credit card in its all-new avatar. This
does all the things that the knife does, but with a twist. The credit card can now cut transaction times, puncture the
distinction between credit and debit, and uncork your spending potential to live life the way you have always wanted
to. Wondering how this is possible? Read on. Contactless Cards Often you have worried about security when the
waiter at the restaurant took away your card for swiping. Contactless cards are a solution for such security risks. It
initiates payments without swiping, with just a tap closer to the terminal or by bringing it closer to the terminal. Result?
It never leaves your hand, giving an added layer of security and cutting transaction times. Contactless cards come
with a chip and radio frequency antenna embedded in it for transferring payment details wirelessly. The payment is
then processed through the issuers acceptance network in the usual way. It can be used wherever a contactless
payment PoS terminal is available. If not available,the card works in the usual swipe mode. Contactless cards have
been introduced in India by ICICI Bank who are the only providers of this technology in the country at present. ICICI
Banks Contactless Cards come with a built-in MasterCard contactless technology. SBI had announced last year
about their plans to launch contactless cards, but their product is still awaited. Debit-cum-credit cards Launched by
IDBI in India and named 'Magic Card', this is a unique product in many ways. As the bank itself puts it, the Magic
Card is a Debit Card with a Credit Limit and an Overdraft Facility. In other words, this is a debit card acting like a
credit card, allowing its users to spend with it, even if the balance in their savings account is exhausted. It works on a

predetermined credit limit just like a credit card. This card is available only for salary account holders with IDBI and
the credit limit will be a few multiples of account holder's salary.For cash withdrawals, there is a daily limit of
Rs.5,000. Like a credit card, it comes with features like reward points. Virtual credit cards If you are one of those who
are frequently transacting with your credit card online, whether it is for your business or personal shopping, reaching
for your physical card every time can get annoying after a time. Enter virtual credit cards, which can give you the
convenience of a normal credit card without requiring you to actually carry it. All you have to do is to sign up for this
facility and pre-load it with the amount you want. The next time you are making an online purchase, you can transact
with the virtual card instead of the physical card. Mobile wallets or e-wallets are a variation of this product. Unlike
mobile wallets, virtual cards are one-time-use-cards and it expires within 24-48 hours after use, leaving no chance of
misuse by others. Most banks issue it as an add-on to the primary card. The details of your card like the card number,
expiry date, etc. are visible online for transacting with it online. The main benefit of this card is that you dont have to
lose your sleep over losing your card or having to carry it 'safely' while you are on the move. This helps when you are
on short trips to other locations and expect to make significant purchases. The transactions using virtual credit
cardsare visible online in your primary credit card statement. Currently, virtual cards are offered by ICICI Bank, SBI
and Kotak Bank. Indias own RuPay Card- a domestic card payment network that assists in electronic money
transfers is a Government initiative to make banking accessible to every Indian household. RuPay card is expected to
be a direct challenge for Visa and MasterCard in the coming years. Innovations are galore in the plastic money world,
both in terms of technology and services, to embrace simplicity, security and mobility. So, the next time you go on a
holiday or business trip, make sure you carry your virtual card with you along with that Swiss Army Knife.
Read more at: http://www.moneycontrol.com/news/credit-cards/product-innovationsyour-cardcredit-card-or-armyknife_1335013.html?utm_source=ref_article