Professional Documents
Culture Documents
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.
Stay updated on the go with Times of India News App. Click here to download it for your device.
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.
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.
Add to My Page
RELATED NEWS
Background Verification
Efficient background verification services to employers. Enquire Now!www.firstadvantageindia.com/Verify
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.
ADVERTISING
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.
Tweet
Ramesh Pathania/Mint
ALSO READ
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%.
Tweet
The mistakes that damage your credit score typically remain on your credit report for
seven years. While you may be able to rehabilitate a damaged credit score after a few
years, it may take the full seven to completely recover and move forward.
Ads
Monthly SIP Investments
www.myuniverse.co.in/ZipSIP
Invest as low as Rs 1000pm in Top SIPs in just 2mins. Start a ZipSIP.
5 Best Stocks to Buy 2015
www.stockaxis.com/
25% Target Returns in 3 - 6 Months. Make Profit with a Free Trial Now!
Villas In Bhopal
www.hdfcred.com/Bhopal-Villas
Choose Different Types of Villas. Visit Now for More Info
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.
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.
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