Credit Cards: The Resistance, Acceptance, and Growth in India

In 1987, when HSBC Bank introduced the ATM concept in India, people were so excited that they wouldn’t need to visit banks, stand in long queues, and fill out forms to withdraw money. People were happy withdrawing cash from their bank accounts and spending it on their expenses. The ATM and Debit Card boom in India has been growing since that invention. Nowadays, people can’t imagine going through the same old process anymore. Today, most of the bank account holders have an ATM or Debit Card.

However, unlike Debit Cards, Credit Cards took so long to gain acceptance among Indian customers. Credit Cards were seen as a liability in India, and people were resistant to accepting that transformation in the way transactions used to happen. The Credit Card market started in 1981 in India when Visa issued the card, and Andhra Bank was the trailblazer of Credit Cards in the country back then.

The word credit did not go down well in the Indian anti-credit mindset in the initial years of the invention of Credit Cards. Not many people were willing to adopt that trend as they felt Credit Cards could increase their credit and liability, which they might not be able to repay. If they default or delay the due payment, the outcome could be against them.

The ability to ‘spend now and pay later’ became the reason behind the acceptance of this plastic currency. And, gradually, with the increase in income and internet boom, salaried individuals also started using Credit Cards.

Today, Credit Cards are not just merely accepted, but are being used exponentially across the country for several reasons – you can withdraw money, make utility and other bill payments, buy a recent expensive gadget and pay in instalments, transfer funds, shop, and do a lot of stuff with this single plastic card.

As per the data recently released by RBI (Reserve Bank of India), around 29.8 million Credit Cards were issued in March, 2017. The usage of Credit Cards has also hit a record high in India. There is a 9% growth in Credit Card outstanding in the initial four months of FY18. The Credit Card spending stood at 33,6196 Crores on 31 March, 2017 in India. In March 2012, the figure was 8,958 Crores, which shows a leap of 275%. The number of defaults has also been reduced in recent years.

So, what is the reason behind this sudden jump? Here are a few reasons:

• Banks are being more flexible in issuing Credit Cards as they can easily access the credit scores of their customers through CIBIL and other credit bureaus. These scores help them determine a borrower’s financial stability and the risk of default, if any.
• There is a contribution of the e-commerce boom too. Now more people are shopping online using digital payment methods, including Credit Cards.
• The merchants are providing attractive offers on Credit Cards for their customers such as cash-backs, rewards, discounts, etc.
• Credit Cards enable customers to buy expensive items on easy instalments.
• The growth is also the outcome of the Indian Government’s demonetization and digitalization move.

Credit Cards are being used in India like never before, and with the speed, people are being digitally advanced now, e-payments (including Credit Cards) are expected to increase 10 times by 2010.