An insightful news report by Mayur Shetty of TNN indicates that average credit card spends are actually increasing in contrary to the perception that business is slowing down. It has actually grown by almost 42 percent in the last two years.

The overall spending on cards went up by almost 57 percent from Rs 7,880 crore to Rs 12,380 crore for the period between May 2011 and May 2013. This piece of data suggests the returning of Indian card industry to growth after witnessing a downturn in between. The total number of cards rose from 1.76 crore to 1.95 crore. The report underlines several key facts and facets of Indian credit card industry and the customer usage pattern based on interviews with experts and the top industry players:

  • 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, according to Uttam Nayak, Visa’s country manager. The company 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 programs. 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 points—be 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,” informs head of cards & personal loans at Citi India, Muge Yuzuak.
  • 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 and a steady growth in card activation rates from the existing base of customers.

To sum it up, credit card companies seem to be in a better position for extending credit than say 4-5 years ago. There has been a fall in ‘wilful defaults’ with customers realizing the ramifications of a bad credit record. Banks have also seemed to have learnt their lessons after a series of defaults post- 2007 in the personal loans’ segment.

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