Despite a fall in credit card sales, average spend peaks

Despite a fall in credit card sales, average spend peaks

For the fifth month in a row since April 2011, credit cards have seen a significant decline in sales. According to the Reserve Bank of India (RBI) data, the number of credit cards sold in August 2011 has declined to 17.59 million against 17.78 million in April 2011, a negative growth of -6.7%. However, the average spend by a credit card holder has peak ed year on year. The credit card holder's spend has increased 23% from `41,900 in FY11 to `51,400 in FY12. The debit card holders' average spend is estimated to be just `2,000 for FY12. "The electronic payment business is yet to evolve in India. Hence, we expect it to grow in double digits. As October-December is a festive season, we expect the credit card business to grow more than double from last year," says Uttam Nayak, group country manager- India & South Asia, Visa Card. Industry experts opine that, the uptake in credit cards is growing at a slower pace than that of debit cards as debit cards are still nascent in India. It has a lot of room to grow as compared to credit cards which is seen gaining better business in terms of volumes and transactions. "Rising NPAs led many banks to come out with more stringent rules for credit cards and some banks also started charging customers with a joining fee and discontinuing some cards which were free for lifetime, affecting the business," says Arvind Hali, head retail assets & credit card at Dhanlaxmi Bank. "The September numbers for credit card sale may see negative growth, but October will witness some good figures due to the festive season," says Sohini Rajola, vice president and head of cards at Axis Bank. In spite of the sluggish growth, the number of transactions via credit and debit cards has been almost equal. For August 2011 saw 55.44 million transactions, out of which 27.75 million where through debit cards. According to RBI estimates, the debit card transactions are growing at 27% against 14% in credit cards. Almost 302.5 million transactions are expected through credit cards in FY12 against 300.2 million expected from debit cards. Surprisingly, despite the higher growth rate in debit cards, RBI estimates the number of transactions for FY12 to be more for credit cards and not debit cards. "Prepaid and gift cards form a major part of the debit card transaction business. This may fluctuate according to festive season. Debit cards are extensively used for mobile recharge and bill payments, more than 20-25%," said Nayak of Visa.