The journey from cash to card in India
The Indian credit card market is becoming tougher and more crowded. Technology is poised to transform this, with over 240 million Indians using the Internet, typically via a mobile device.
A fresh competitive arena is emerging with new players equipped to contest it. For customers, especially the more affluent, this means an expanding range of payment options. Their approach to credit and debit card services will become still more informed, active, demanding, and sophisticated.
Credit cards are a tool of convenience and accessibility, one that simplifies everyday life. As a result of its unparalleled convenience coupled with the tremendous rise in popularity of online shopping, the credit card has seen a rise in acceptance amongst customers in India, resulting in a 9.8% credit card base growth in the last year with consumers spending 1.9 trillion rupees in 2015.
The facilitation of electronic transactions might also bring a sense of transparency to the market in India, reducing instances of tax avoidance that are so common with cash payments. The Ministry of Finance in India will aim to discourage cash transactions, by incentivising the use of e-transactions (transactions by which the customer authorizes the movement of money through electronic means).
It could be argued that the reluctance in using plastic money is born from a lack of awareness, which in turn results from a lack of informative literature on the subject. There are also significant levels of distrust, given the threat of fraud and the limited infrastructure of credit card acceptance in the country. The benefits that the credit card model can have, however, are huge, including benefits for merchants (increased sales) benefits for banks (make money on credit) and benefits for the consumer (incentive to use credit card to make purchase based on future income).
With the Government of India and major banks pushing for a rollout of card-based transactions on a national level, the future of the credit card looks bright. The steady increase in trust in the credit card in India seems to indicate that the credit card industry is set to flourish more than any other industry sector.