Decoding Credit Card Craze Of 2023, Navigating Road Ahead In 2024

By Shailendra Singh

In the dynamic landscape of credit cards, the year 2023 proved to be a pivotal period marked by substantial growth and evolution, particularly in India. The sector witnessed notable transformations driven by shifts in consumer preferences and economic dynamics, leaving an indelible mark on the market.

According to the Reserve Bank of India (RBI), credit card usage in India experienced a remarkable surge, reaching a historic high of Rs 1.78 lakh crore in October 2023. This surge, fueled by robust consumer activity during the festive season, is indicative of a broader trend in the market.

Projections suggest that the number of credit card users in India could reach the 100 million milestone by early 2024, underlining the industry’s significant expansion.

The industry’s expansion is intricately linked to the burgeoning digital payments ecosystem. With the adoption of digital transactions by more merchants and service providers, credit cards have gained widespread acceptance due to their convenience.

Factors such as the overall increase in disposable income, the tech-savvy preferences of millennials and Gen Z for digital payments, and the thriving e-commerce sector have significantly propelled credit card transactions.

The popularity of credit cards is further reinforced by the convenience of online shopping, coupled with exclusive deals and discounts that they offer, making them the preferred payment method in the rapidly growing digital economy.

As the industry continues to evolve, several key trends have shaped the market landscape, fueling its growth in the recent year.

• Unified Payments Interface (UPI) Integration: The UPI on credit cards is a significant regulatory move that complements the rise of contactless payments. This advancement enables customers to make transactions without depleting their bank account balance and or having to carry their physical cards. Consequently, this not only enhances convenience for buyers and sellers but also minimises the risk of fraud and loss at the same time.
• Tailored Solutions by New-age Banks: New-age Banks are playing a pivotal role in the credit card surge by offering tailored solutions to diverse customer bases. These customised cards cater to specific needs and preferences, enhancing the appeal of credit cards in the market.
• Co-branded Credit Cards: The rise of co-branded credit cards, developed in collaboration between issuers and major merchants across various product categories, has added a new dimension to the credit card landscape. These partnerships often come with exclusive rewards and benefits, attracting a broader consumer base.
• Entry of NBFCs and FinTech Firms: Non-Banking Financial Companies (NBFCs) and FinTech firms have entered the credit card space, collaborating with credit card issuers through co-branding partnerships. This collaboration has not only expanded the reach of credit cards but has also introduced innovative features and technologies to the market.
• Regulatory Focus on Security: The regulator is focusing on safeguarding consumers from fraud and misuse of credit cards. This emphasis on security and transparency has built trust among users, contributing to the increased adoption of credit cards.
• Technology and Sustainability: Organisations are enhancing IT capabilities to meet evolving challenges and fortify data security. Credit card companies are integrating sustainability, diversifying leadership, and enhancing governance transparency. Issuers are improving applications to meet customer expectations for superior mobile experiences. Additionally, credit issuers are exploring new credit risk models beyond traditional ratings to serve a broader customer base.

Looking ahead to the coming year, the credit card industry is poised to continue evolving and sharpening its strategies. This evolution will be driven by changing consumer behaviours, technological advancements, and global influences.

To stay ahead of the curve, card issuers and payment processors must embrace adaptability and sustained innovation. A pivotal aspect of this evolution is the adoption of a digital-first approach, catering to the preferences of younger demographics. This involves optimising online account management, introducing virtual cards, and leveraging end-to-end digital journeys.

The integration of artificial intelligence (AI) and advanced analytics will play a crucial role in redefining and accelerating the growth and profitability of digital lending within the credit card landscape.

As the industry continues to shape its outlook, a strategic alignment with these trends will be essential for sustained success and relevance in an ever-evolving financial landscape.

Card issuers and payment processors must prioritise adaptability, personalisation, and secure solutions to safeguard consumers’ financial well-being in this rapidly changing environment. In doing so, they will not only navigate the transformative waves of the credit card industry but also set the course for a resilient and innovative future.

-The author is MD & CEO, BoB Financial. Views expressed are personal.