Credit cards gain currency again

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The credit card business, which is small compared to debit cards in the country, seems to be on an upswing since the Covid-19 pandemic not only in terms of spends but also acquisition of new customers.

Notwithstanding the temporary halt put by the Reserve Bank of India on HDFC Bank from on-boarding new credit card customers, other banks are going full-swing ahead with plans to acquire more customers. But they remain cautious about who they on-board as well as any signs of emerging stress on their portfolio.

“It is business as usual for us. We have to play to our own strengths and focus on what we do right,” said a senior banker, when asked how the HDFC Bank development will impact the cards industry segment.

 

Onboarding customers

HDFC Bank has the largest number of outstanding credit cards at 1.49 crore as on September 30, 2020 out of the total 5.86 crore cards in the country. Its closest competitor is SBI, with about 1.1 crore credit cards outstanding.

This is small change compared to the 86.54 crore debit cards outstanding in the country as on September 30, 2020, but a large number of debit cards are for PMJDY accounts.

YES Bank, which is focussing on its retail book plans, will issue 25,000 credit cards this month.

“Credit cards is an important area of focus. Most banks start with the credit card business to improve engagement with customers, improve RoA over a period of time and build a good payment franchise starting with credit card,” said Rajanish Prabhu, Business Head, Credit Cards and Merchant Acquisition, YES Bank.

RBL Bank also expects to reach pre-Covid levels in customer on-boarding either this month or by January. According to Harjeet Toor, Head, Retail, Inclusion and Rural Business, RBL Bank, the lender enrolled about 1.25 lakh new credit card customers last month as against a monthly run rate of 1.30-1.35 lakh customers before the Covid-19 pandemic.

Payment growth

A recent report by TransUnion Cibil had highlighted that credit card inquiry volumes have recovered fully from the trough seen in April 2020, and in October 2020 were at 106 per cent of October 2019 levels. Banks are, however, awaiting more data from bureaus on repayment trends before easing their underwriting criteria for onboarding customers.

Data also indicates that credit card spends are back on track due to the festive season and pent up demand. According to a digital payments report by WorldLine, the transaction volume of credit cards in the second quarter increased by 108 per cent at point of sale (POS) and 36 per cent in e-commerce as compared with the previous quarter. In the third quarter, it further increased by 19 per cent and 8 per cent at POS and e-commerce respectively.

In terms of value, credit cards recorded 140 per cent growth at POS and 85 per cent growth in e-commerce in the second quarter, and further by 9 per cent and 15 per cent at POS and e-commerce respectively in the third quarter.



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