Rise in credit card and UPI payments point to increased consumption, experts say

The increase in credit card and UPI payments indicates an increase in consumption amid the resumption of economic activities with a declining impact from the Covid pandemic, experts and market participants have said. According to monthly data from RBI, the Unified Payments Interface (UPI) transaction increased from Rs 9.83 lakh crore in April this year to Rs 10.73 lakh crore in August.

Similarly, credit card spending through the PoS (point of sale) terminal increased from Rs 29,988 crore in April this year to Rs 32,383 crore in August. Credit card spending on e-commerce platforms, which was valued at Rs 51,375 crore in April, rose to Rs 55,264 crore in August.

Rama Mohan Rao Amara, MD and CEO of SBI Card, said credit card outstanding grew at a compound annual growth rate (CAGR) of 16% between FY17 and FY22, according to RBI industry data. .

“With the increased adoption and use of credit cards, there has also been an increase in spending. Over the past few months, the industry has seen monthly credit card spending consistently exceed Rs 1 lakh-crore quantum, indicating a robust consumption pattern. With the holiday season coming up, there is anticipation and anticipation all around,” he said.

Experts and market participants believe that the increase in the volume and value of digital transactions bodes well for the economy. It also indicates that consumers are becoming more familiar with different digital payment methods and letting go of their inhibitions.

Anand Kumar Bajaj, Founder, Managing Director and CEO of PayNearby, believed that the increase in volume and value of card and UPI payments paints a positive picture of the digital payments landscape in the country. The push, he said, indicates that Indian consumers are letting go of their inhibitions and becoming more open to adopting online payment.

“As consumers and merchants have experienced the ease and security of digital payment methods, this has led to a change in behavior among them. This growth is being driven by the growing familiarity and convenience of the platforms e-commerce platform where consumers make more purchases online,” Bajaj said.

The government’s push towards digital transactions, rising incomes, growing use of smart phones and improved internet connectivity are contributing to the growth of online payments. In addition, more and more merchants are deploying a digital payment infrastructure.

According to Mandar Agashe, MD and Vice President of Sarvatra Technologies, rising spending levels imply a recovery in consumption as pandemic-induced uncertainty nearly dissipates and markets return to normal.

“July and August were mainly marked by selling seasons on e-commerce platforms and various offers made accessible by merchants to encourage transactions through UPI. UPI is further expected to surge during the current festival season due to demand growing number of Tier II and Tier III cities confidently adopting the UPI channel for their transactions,” added Agashe.

Anurag Sinha, CEO and Founder of OneCard & OneScore, said the increase in payment volume and value over the past few months across all platforms clearly reflects the strength of the retail economy as well as renewed confidence consumers.

Last month, the Reserve Bank of India sought public input on payment system fees and charges, with the aim of making such transactions affordable and economically rewarding for the entities involved.

Fees in a payment system are the costs imposed by payment service providers (PSPs) on users (originators or beneficiaries) to facilitate a digital transaction. Fees are collected from originators or beneficiaries depending on the type of payment system.

Ranen Banerjee, Partner – Economic Advisory Services, PwC India, said the increase in UPI transactions bodes well for the economy, but “we may not be able to directly correlate it” to consumption as several factors drive to more digital transactions – the main one being the growth of e-commerce.

“The growth of credit card spending and not that of debit card spending can be seen from two lenses. One that households are spending more or the second that they are stressed and dependent on credit,” Banerjee said.

Market players have further stated that traditionally, the travel, entertainment and dining category is one of the key categories for consumers when it comes to online credit card spending.

“With the easing of travel restrictions, we have also seen an increase in travel spending during the summer season. Spending in this category has now exceeded pre-Covid levels,” Amara said.