Credit card issuance rises, but Indians’ February spending at seven-month low

While banks have been successful in pushing more credit cards to Indians, fewer are using them at merchants and online sites, according to new data. Indians’ average spending on credit cards in February was the lowest in seven months. Expenditure has decreased in the last four months or after Diwali.
This is a negative, given that the month saw the partial lifting of restrictions in various states in India. Additionally, data from the Reserve Bank suggests that card issuance by banks continued to gain momentum in February.

Ticket size movement

During the July-February period, Karur Vysya Bank recorded the largest decline in banknote size with a negative of 46.2%, followed by City Union Bank (-20.7%), IDFC Bank (- 16.4%) and Indian Bank (-15.25%). . During the same period, AU Small Finance Bank (AU SFB) saw the largest increase in note size at 64.1%, followed by Federal Bank (62.9%), Standard Chartered Bank (60%) and Bank of America (59.24%).

Card spend

Momentum was weak, month-over-month for the industry, with February (average) ticket count lower than August. At the industry level, card spend was down 4% month-over-month. The weakest momentum was observed for South Indian Bank, SBI Card, IDFC Bank, DBS Bank, among others. A total of 19 players saw a drop in average ticket size.

Card issues

In terms of credit card issuance, from July to February, the main gainers were South Indian Bank (base effect), AU SFB, Federal Bank and Karur Vysya Bank. Those that saw credit card declines from July to February include City Union Bank, DCB Bank, Bank of America, HSBC, Standard Chartered Bank, American Express, J&K Bank, Tamilnad Mercantile Bank and Citibank. Overall, the number of credit cards rose 1.97% in February from 1.89% in January, month-on-month.

Market share movement

HDFC Bank continues to be the leader in terms of market share of credit cards issued. SBI Card lost 127 basis points in market share month-on-month, while ICICI Bank gained 94 basis points. The regularity in the conquest of market shares continued for the eighth consecutive month for Axis Bank. This should improve due to its acquisition of CitiBank’s consumer banking business in India for $1.6 billion. Axis Bank CEO Amitabh Choudhry recently told CNBC-TV18 that the card business will grow by 57%.

Outlook

Card distribution remains healthy, which has been a key factor over the past few months. Axis Bank is doing well and with the possible merger of Citibank’s retail business, its market share may improve to over 15.5% from current levels of 12%. Falling spending is a worrying factor, but with restrictions removed, spending should improve from March.