After UPI, now credit cards overtake debit card transactions

India’s digital payments story is increasingly swinging towards credit. While the country was historically a debit card-using nation, recent data from the Reserve Bank of India shows that credit card transactions have gone up significantly.

With 25 crore card transactions for merchant payments in April this year, credit cards have overtaken debit card swipes, which stood at 22 crore. In terms of value of transactions, credit cards stood at Rs 1.3 lakh crore against Rs 53,000 crore for debit cards.

These are transactions by consumers both at ecommerce and physical outlets.


In growth terms, credit card swipes jumped 20% in the last one year, while debit cards fell 31%.

Of course, Unified Payments Interface or UPI is eating into debit card usage in the country, but the significant growth of the credit card ecosystem shows the adoption of the product. UPI at 536 crore merchant transactions in May this year rules the market. It has doubled from 254 crore such transactions from a year ago.

The number of credit cards in the country currently stands at 8.5 crore against 7.5 crore a year back. Three years back, this number was less than 5 crore.

“Unlike UPI, credit cards are revenue generating for the entire ecosystem and are typically used for higher ticket size purchases and consumption activities,” said a banker who tracks this space.

Fintechs jump in

Indian startups are increasingly looking at financial services to bulk up their toplines and co-branded credit cards are a quick route to that.

Brands like Myntra and Paytm have recently launched co-branded credit cards with Kotak Mahindra Bank and SBI Cards. More such partnerships are being worked out between consumer facing apps and banks.

“A large clothing marketplace might operate at a margin of 50% to 60%, it can easily offer a 10% discount for its credit card users, that way it builds loyalty,” said a top executive at a fintech firm that supports such transactions.

Banks want to expand their credit card base, but customer acquisition continues to be a challenge. A branch could spend around Rs 2000 to onboard one credit card user. Major costs being feet-on-street agents and physical booth rentals at malls, airports. But these large consumer facing applications can bring in a steady stream of customers from their apps.

One such successful partnership is between Amazon Pay and ICICI Bank. Vikas Bansal, whole time director, Amazon Pay India, pointed out that activation rates on these credit cards hover around 70% against the industry standard of 50%.

The risks associated with credit

The repayment aspect is perhaps the most interesting part of a credit card. Technically it is a loan and sometimes consumers tend to spend more than they can repay.

Data from RBI show that credit card outstanding, the amount that needs to be repaid by its users after the credit free period, has jumped 35% to Rs 1.9 lakh crore in March 2023 from Rs 1.4 lakh crore in March 2022.

“Credit cards are easy to use and offer great cashback and reward points, but interest rates are very high for revolvers, hence consumers need to be careful while using these products,” said the banker quoted earlier.

Revolvers are consumers who do not repay the entire outstanding amount at the end of the credit free period. Interest rates of as high as 45% per annum can get charged on the amount that remains due after the credit free period.

The rapid adoption of credit cards is a result of better distribution, but also the changing attitude of Indian consumers towards credit.

Industry data shared by FACE, an association of fintech lenders, show that Rs 92,848 crore worth of loans were disbursed by a clutch of digital lending startups, up 129% in a year. This underlines the growing appetite of credit among Indian consumers and credit cards with their reward points and glamorous looks are riding that wave.