Digital payments script robust growth story in India, cards in race

India’s Unified Payment Interface (UPI) logged in 421 crore transactions in October alone, led by a strong push from festive shopping. This growth has been widespread, even rural markets contributed in a big way. UPI payments have grown 100 percent year-on-year to Rs 7.7 lakh crore in October and the month-on-month ticket size was stable at Rs 1,829.

“The UPI market share has been increasing constantly and it stood at 80 percent over the first seven months of FY22 as against a mere 9 percent growth in FY18 (73 percent in FY21), while the share of debit and credit cards stood at 8-10 percent,” a report from Motilal Oswal said.

Digital payments have grown five folds from 1,004 crore in 2016-17 to 5,554 core in 2020-21. Minister of State for Electronics and IT Rajeev Chandrasekhar told Parliament on Wednesday that the number of digital transactions stood at 4,683 crore till mid-November this fiscal. It was 3,134 crore in FY19, 4,572 crore in FY20, and 5,554 crore in FY21.

Transactions through mobile apps increased more than three times from 112 crore in April 2020 to 370 crore in June 2021 and consequently raised its value from 3.6 lakh crore to Rs 11.4 lakh crore.

RBI’s POS Push

The Reserve Bank of India is pushing for digital payments through its Payments Infrastructure Development Fund (PIDF) scheme, which aims to create about 3 million merchant touch points every year from January 1, 2021 for three years.

India added 2.7 lakh POS (point of sales) terminals in the nine months of this calendar year as per a report from the RBI, taking the total count to 49.7 lakh at the end of September.

Private sector banks have the major chunk of POS terminal market at 67 percent, while 26 percent is with their public sector peers, the RBI report said. Payment banks have 6 percent market and rest 1 percent is represented by foreign banks. The banks deploying POS terminals include HDFC Bank, Axis Bank, ICICI Bank, RBL Bank, State Bank of India and UCO Bank.

Credit Cards Join the Party

The banking system added 1,336,000 credit cards in October – up 22 percent from September – and took the base to 66.4 million, making an on-year growth of 11.7 percent. “This growth in credit cards base is the highest in the past 14 months,” said a report from Motilal Oswal.

ICICI Bank witnessed the strongest on-year growth of 26 percent in October and was followed by RBL Bank which grew 16.7 percent, IndusInd Bank by 15.5 percent and SBI Cards by 14.5 percent.

ICICI Bank was also the largest acquirer, adding 278,000 cards, while HDFC Bank, Axis Bank, SBI Cards and RBL Bank added 258,000, 220,000, 184,000 and 151,000 cards, respectively, the Motilal Oswal report said. Standard Chartered Bank saw a decline of 15,000, while American Express and Citibank recorded 6,000 drop each in their card base.

The total credit cards spends surged to Rs 1,01,200 crore in October, posting a sequential growth of 26 percent and a yearly growth of 56 percent. On a two-year CAGR basis, it was 19 percent, Motilal Oswal said.

In October, Axis Bank reported the highest sequential growth in card spends at 36 percent, followed by HDFC Bank at 32 percent and SBI Cards at 30 percent. ICICI Bank and IndusInd Bank stood in the region of 25-26 percent rise in spending on credit cards, while it was 21 percent for RBL Bank and 16-18 percent for Citibank and American Express. Standard Chartered Bank saw a modest growth 9 percent, while Kotak Mahindra Bank saw a 2 percent decline.

A two-year CAGR says that spending on ICICI Bank, IndusInd Bank, SBI Cards, Kotak Mahindra Bank and RBL Bank grew 52 percent, 36 percent, 21 percent, 21 percent and 19 percent, respectively, as per the brokerage report. HDFC Bank and Axis Bank clocked a growth of 10-14 percent, while foreign lenders American Express, Citibank and Standard Chartered Bank suffered a decline of 20 percent, 7 percent and 2 percent, respectively.

Monthly spends per card also reached above the pre-COVID levels from an average of Rs 10,700 to Rs 15,200 on the back of increased ticket size to Rs 4,700 as well as a rise in the number of transactions per card from 2.8 in September to 3.3 in October.