Presently the India Cards and payments market is strongly growing and remains a dominant player globally. The impacts of digitalization, along with the augmented usage of card transactions across different verticals and trends, provide the forecast of changes to be witnessed in the market. Also, the intense competitive warfare between public and private banking corporations with several new schemes and policies to attract customers. In addition, cash usage is progressively dropping in the country due to government policies and schemes, bank efforts in optimizing and strengthening their digital ecosystem, and rising customer confidence in online payments. The central government has taken various measures to shift more of the population under the domain of the banking system, along with promoting electronic transactions.
The market is also expanding due to the acute decline in the currency in circulation in the country. For instance, in April 2024, the circulation of currency stood at 50800 crores, which is less than 59400 crores in March 2024 and severely lower than 76800 crores at this point last year. This industry pattern is surging the demand for cards and different modes of payment in daily routines.
Increased credit card usage is another factor propelling the market growth rate. This is due to rising card offers and cashback on online shopping, food orders, and the growing popularity of tap-and-pay and contactless cards. According to research, transaction numbers via credit card witnessed a year-on-year surge of 30 percent in the financial year 2022-2023 against FY 2021-2022. Industry experts are anticipating an increase in credit card use due to structural factors elevating demand among customers and fortified systems from the lenders.
Merchant fees are a major issue in the India cards and payments market. Shopkeepers, traders, and dealers all encounter this problem because of the fees related to accepting credit card (CC) payments. This comprises processing and interchange charges that substantially affect their profit margins as imposed by credit card players. Apart from this, the end-users in the country are usually waiting multiple days for funds from CC transactions. This delay in payment is a worry for small business owners or those with limited cash flows. Further, small enterprises and shopkeepers, particularly in rural or cash-based economies, are facing problems in accepting credit cards owing to the lack of resources or infrastructure.
Financial companies have invested significantly to move to asset-light infrastructure by shifting towards cloud-based services and storage. Moreover, the government has implemented fraud detection and mitigation at every level to enable a secure and encrypted payment experience for clients. Besides this, the country has also provided financial support for modern payment systems such as Central Bank Digital Currency (CBDC). It plans to establish emergency payment systems, for instance, a lightweight payment and settlement system (LPSS).
Additionally, contactless payments and NFC technology, Digital-first, and virtual credit cards, Sustainable and eco-friendly cards, and AI-powered customer service are presenting potential opportunities for the market players.
Also, chargebacks and the risk of fraud have and continue to hamper the expansion of the India cards and payments market. Likewise, as per the Reserve Bank of India (RBI), digital payment frauds in the nation experienced an over five times growth to 14.57 billion rupees (1457 crore rupees) in the financial year that ended in March 2024 in comparison with the previous period of 2022 to 2023.
The heightened application of other payment methods, like the Unified Payment Interface (UPI), is a major factor challenging the market growth rate. As per the study published in April 2024, the UPI continued to dominate digital payments in the country. The volume of transactions climbed to 65.77 billion through UPI in the second half of 2023. This is a huge 56 percent rise against the same time last year, hurting the market growth.
Credit cards is the dominant segment of the India cards and payments market. This is due to the expanding middle-class disposable income, growth of fintech companies, shift in consumer mindset, initiatives like RBI’s card acceptance development fund, the emergence of co-branded cards, and supportive regulations. Moreover, the market holds a massive untapped potential in tier 2 and 3 cities. Credit card companies are increasing their presence beyond the core urban areas owing to rising digital connectivity and financial inclusion in smaller cities. As per a study, online credit card spending for the first time grew over 1 lakh crore, which is a 20 per cent and 10 per cent surge from March 2023 and February 2024, respectively. Smaller purchases made the bulk of the transactions. The Indian industry is led by HDFC Bank with 20 per cent, SBI at the second, ICICI Bank at third then Axis Bank and Kotak Mahindra Bank.
Whereas the prepaid cards segment has also witnessed growth at a higher CAGR in the last three years. The segment remained on an upward trajectory despite the expansion of UPI. Enhanced digital payment facilities and services, along with greater smartphone penetration, have supported the adoption of payment products like digital wallets and prepaid cards over the last few years.
The POS segment is the dominant category of the India cards and payments market. The segment’s market size attained a valuation of around 38 billion Indian Rupees, depicting the rising adoption of digital payment products and the increasing demand for modern POS systems across different industries. The industry has been accelerated by factors like government schemes and policies for cashless payments, the expansion of retail and e-commerce sectors, and the requirement for effective and secure payment processing systems. Apart from this, the segment is experiencing various major patterns that are moulding its growth and advancement. This includes a transition towards mobile POS, Near Field Communication (NFC) and QR codes, integration with business management tools, cloud-based POS Systems, increased security measures, and government initiatives.
The ATM segment is expected to have rapid growth during the forecast period due to the higher application of contactless transaction methods, coupled with the rising penetration of online banking services, which is mainly pushing forward market growth over the nation. In addition, people in India start transactions at ATMs by inserting their bank cards, usually debit or credit cards, in the card reader slot. After this, customers dial a personal identification number (PIN) and are guided via a user-friendly interface smart-screen on the ATM. Furthermore, the menu choices serve several financial transactions, providing users to smoothly manage their banking requirements.
The payment cards segment accounted for the maximum portion of the India cards and payments market share. This can be attributed to growing consumer expenditure. According to industry experts, India, which is basically a cash-driven economy, registered strong development in the adoption and utilization of card payments aided by improvement in payment infrastructure and consistent enhancements by financial companies and establishments to boost financial inclusion and accelerate cashless payments. Apart from this, the payment cards segment rebounded in the post-COVID-19 period and was primarily fuelled by the charge and credit cards, with this expanded by more than 50 per cent in 2021 and 45 per cent in 2022, as customer expenses jumped upwards on travel, accommodation, restaurants and food services and transportation.
The credit transfer segment is moderately growing and is believed to expand in the coming years. This can be attributed to the emergence of embedded finance in which transaction features are incorporated directly into people’s digital experiences.
The India cards and payments market is rapidly advancing owing to the tremendous adoption of digital payment options and the expansion of the e-commerce sector. With the acceleration of e-commerce, the use of contactless payments, and improvements in the value proposition, the post-pandemic credit card environment has witnessed a significant shift and is evolving at a steady pace yearly. Additionally, the industry at the national level will see substantial change with the new-age products such as the National Automated Clearing House (NACH), National Electronic Toll Collection (NETC), etc. All these are progressively accepted by the customers and are anticipated to become both a challenge and an opportunity for the market players.
Frequently Asked Questions
The most commonly used cards in India are debit cards, followed by credit cards. Prepaid cards and contactless payment cards are also gaining popularity.
Key drivers include the rise of e-commerce, increasing smartphone penetration, government policies promoting digital payments, and improved financial literacy among the population.
Advancements such as the implementation of Unified Payments Interface (UPI), the use of blockchain technology for secure transactions, and the development of biometric authentication methods are shaping the market's future.
Key challenges include cybersecurity threats, the digital divide between urban and rural areas, regulatory compliance, and the need for continuous technological upgrades to keep pace with evolving consumer preferences.
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