While the card industry's growth remained modest, a survey released on Friday revealed that Unified Payments Interface (UPI) transactions grew at a remarkable rate of 75% Compound Annual Growth Rate (CAGR) and that UPI expenditures increased at a rate of 68% CAGR between August 2019 and August 2024.
As to the Axis Securities data, the transaction volume ratio of UPI is 38.4 times higher than the credit card transaction volumes, indicating its great popularity. Although just 33% of all UPI spends were made as of August, 96% of transaction volume is less than Rs 2,000, indicating that UPI is still the favored method for smaller payments.
The UPI-to-Credit Card spending, however, remained relatively consistent at present levels in August, standing at 0.3 times, owing to the smaller ticket size of UPI transactions. August saw 924,000 net card additions for the sector, up from 755,000 in July. On the other hand, the pace has drastically slowed, falling 34% YoY so far this year.
"In light of the segment's worries about asset quality, we think it indicates the issuers' prudence and cherry-picking of consumers. According to the research, the sector added 3.7 million cards in the first five months of FY25, as opposed to 6 million over the same period in the previous fiscal year.
Debit cards have not been able to keep up with the evolving customer preferences toward the usage of credit cards and Unified Payment Interface as a payment method.
The survey stated that throughout the period of August 2019 to August 2024, debit card transaction volumes and expenditures have declined significantly by 20% and 6% CAGR, respectively, in contrast to the rise of credit cards.
In every category, private banks have outperformed their international and public counterparts.
Of the 924,000 new customers added to the sector in August, private banks gained 583,000 (or 63% of the market share in customer sourcing). The analysis anticipates that the approaching holiday season will lead to a resumed economic pace.
