Financial Cards and Payments in India

Financial cards and payments in 2024: The big picture

The Indian Government’s national mission to achieve financial inclusion continued to bring more of the population into the formal banking structure in 2024, leading to greater awareness and the subsequent adoption of financial cards. The national financial inclusion mission, called Pradhan Mantri Jan Dhan Yojana (PMJDY), led to a further portion of the unbanked population becoming bank customers and the issuance of debit cards upon the opening of bank accounts by such customers became a crucial catalyst for the steady growth observed in the number of debit cards issued during the year. While debit cards continued to dominate the overall financial cards market in volume terms, the credit cards segment witnessed more robust growth. The adoption of credit cards was driven by its use amongst a key demographic segment, evolving purchasing patterns, and relatively low existing penetration levels. On the other hand, the pre-paid cards segment was driven by robust demand for travel open loop cards and transportation closed loop cards. Nonetheless, amidst growing competition from alternative payment modes, cash continued to dominate largely due to the persistence of habit and greater acceptance levels across rural areas.

2024 key trends

In India, affordable smartphones and mobile internet packages have extended the mobile internet penetration, with almost 80% of the population having possession of at least one smartphone in 2024. This, in turn, is transforming the payment habits of Indian consumers, with greater demand for digital payments via Unified Payment Interface (UPI) and credit cards. Personal electronic direct transactions, which include UPI, remained the fastest growing payment mode in 2024, driven by ease of usage and widespread merchant acceptance. Moreover, UPI’s unparalleled ease and convenience have positioned it as a preferred choice for a plethora of everyday transactions, eroding the stronghold in small-value transactions traditionally held by debit cards. The rising smartphone penetration and enhanced mobile internet connectivity are making it easier for Indian consumers to access and use UPI-based payment services, which remain free from MDR (merchant discount rate) charges, fuelling both value and volume transactions via mobile payments through such UPI based QR code scanners. In addition, evolving purchasing patterns are leading to a greater inclination towards the online channel for a wide range of purchases, which has supported the strong growth of credit cards whose majority of transactions are now performed through the online channel in India.

Co-branded cards remain a focus to provide more tailored benefits

With debit cards nearing saturation stage, and credit cards in a nascent stage, issuers are increasingly targeting co-branded cards within both domains to drive uptake in volume terms, Co-branded cards, which are issued by banks in partnership with an external brand, which can be a foodservice aggregator, hotel chain, online marketplace, or any other sought-after brand, leverages the external brand’s established associations to attract those consumers who value the partnership for the tailored benefits such cards offer. With relatively high food inflation and a slowdown in discretionary spending, such cards attracted those seeking to get the best value out of their spending. Moreover, with some of the pre-existing co-branded cards issued by banks, especially in partnership with online marketplaces, witnessing significant demand in recent times, prominent brands such as EaseMyTrip, Indian Hotels Company Ltd (Taj), and several others looked to achieve a similar kind of demand through their respective co-branded cards launched during the year as they worked to ensure better customer retention through rewards and exclusive offers.

Competitive landscape

State Bank of India (SBI) maintained its leadership position in financial cards overall in 2024, supported by a strong presence in the key debit cards category. A major growth driver for SBI has been the widespread reach of its physical branches across the country. Consumers, especially in semi-urban and rural areas, tend to prefer banks whose physical branches are near their place of residence. While public banks continued to dominate the debit cards market in 2024, private banks in India maintained a strong foothold in the credit cards landscape. HDFC Bank continued to lead, followed by SBI, ICICI and Axis Bank. Even amidst the growing issuance of credit cards by newer banks, the competitive landscape for credit cards remained consolidated, with the top four banks holding almost three-quarters of value transacted via such cards in the final year of the review period.

What next for financial cards and payments?

The Indian Government’s focus on financial inclusion will play a crucial role in bringing more of the population into the formal banking system during the forecast period, leading to steady growth in financial cards. As financial knowledge picks up, along with the decline in the unbanked population, debit cards, upon which the Indian banking system is traditionally built, will witness limited yet steady growth in volume terms. The limits on growth will push issuers to prioritise the commercial segment, along with the co-branded space, to enhance the value proposition and subsequent uptake of such cards in India.