Bringing to life all the materialistic desires with just a rectangular plastic card is the credit card. From 18.31 million in March 2010 to 57.4 million in March 2020, there has been a 213.6 per cent rise in the number of credit cards used in India.
Digital Media: The Youth Magnet
With millennials taking the crown for increasing credit card penetration in India, social media has become an important tool for companies to promote the usage of credit cards. Companies are spending millions on digital ads to educate and make the public aware of the credit card. While HDFC plans to spend 70-75 per cent of its ATL (above the line) marketing budget on digital marketing and advertising its Millenia cards over social media for building awareness, we have finance professionals encouraging credit cards to their viewers on social media.
According to Forbes, millennials focus more on discounts and 66 per cent would easily switch brands if given a 30 per cent discount on products. By prioritising price and being mindful about money, hefty rewards and benefits allure them, which is an advantage vastly used by credit card companies. They advertise cashback offers and monetary incentives to pull customers towards them. Social media acts as visual inspiration where financial accounts educate people on saving strategies and building wealth. Instagram with its more youth-centric nature promotes financial literacy that matches the goals of millennials and Gen-Z, and credit cards sit comfortably in that mould.
Demonic Demonetisation? Not really!
The cash crunch and long queues, sweat and surely no social distancing, yes: demonetisation, November 2016! For a few industries like the credit card and digital payments sector, this was a golden opportunity!
One year of rough sailing led to an almost 50 per cent rise in credit card applications in 2017, according to Transunion Cibil. Demonetisation was aimed at creating a cashless economy; although that didn’t happen, India did raise its digital and card payments. Cash exchange didn’t drop much but the number of credit cards surged from 26.39 million in August 2016 to 32.65 million in August 2017, based on RBI’s reports. The hassle of paying in cash made people fly to cards; people sure adore convenience!
According to Visa’s Digital Payments Tracker for India, obsolete notes that were pushed out of the Indian system in November 2016 were more than those that were added back. This was a direct encouragement for digital payments to grow and outpace past performances. Even credit card outstandings for September 2017 grew to Rs 59,900 crore from Rs 43,200 crore in September 2016.
Panning the Pandemic?
Skimming through the calendar and reaching 2020 will tell you a story that scares those who lived through it. Three months of lockdown due to the COVID-19 pandemic led most of the businesses to shut down physical stores and move to virtual ones. Payments took a highway to the digital world. The looming uncertainty, job losses, spreading of the virus and long hospital bills bid sayonara to shopping for some time. However, now, in 2021 it is safe to say that things have come back on track. Credit card usage has risen and demand can be seen as buyers are spending on automobiles, apparel and other products. RBI said that credit card spending reached the same levels in August 2020 as that in March 2020. There has been an increased amount of spending at PoS (Point-of-Sale) terminals with credit cards. Hence, this means that more people are getting out of their houses to shop and are choosing credit cards as their preferred payment gateway. Though the value of these transactions remains low the number of transactions is on the rise which makes it a payment tool over a credit creator.
These facts and this analysis help understand how the credit card is gradually shifting from being an elitist to a mass product. With a greater number of card applications, transactions, outstanding balance and attraction towards availing benefits and discounts, the credit card industry is booming and these cards are turning out to be an accepted form of payment for many. With a rise in demand in the market, there is still a lot of scope for credit cards to grow. How much growth will be desirable for the economy and the market is, however, yet a mystery.