According to a recent PwC report, India’s credit card industry is poised for significant growth over the coming years. The number of credit cards in circulation is set to reach 200 million by FY29, growing at an impressive compound annual growth rate (CAGR) of 15%. This marks a continued expansion of the credit card market, which has already seen the number of cards double over the past five years. The report highlights that the credit card sector is not only growing in terms of cards issued but is also experiencing a surge in transaction volumes and transaction values, thanks to new product offerings and broader customer segments.

Credit Card Market to Double by FY29

India’s credit card industry has witnessed unprecedented growth in recent years, with the number of cards in circulation doubling in the past five years. This momentum is expected to continue, with the number of credit cards in force projected to hit 200 million by FY29, replicating the growth patterns observed over the past decade. The rise in credit card adoption is being driven by innovative products, an expanding customer base, and a growing emphasis on rewards programs that attract a diverse range of users.

One of the key drivers behind the growth in credit card transactions is the introduction of new offerings that appeal to different segments of the population. For instance, premium credit cards that provide exclusive benefits have found a growing market among affluent consumers, while entry-level cards with simplified features cater to first-time credit users. These diverse offerings have enabled the credit card market to expand rapidly, driving a 22% increase in transaction volumes and a 28% surge in transaction values in FY24.

The growing reliance on digital payments has also contributed to the credit card industry's success. As India continues to transition towards a cashless economy, credit cards have emerged as a preferred payment method for a wide range of purchases, including online shopping, travel, and entertainment. With the credit card industry poised for sustained growth, it is expected to play a key role in shaping India’s financial landscape over the next few years.

Decline in Debit Card Usage Amid UPI’s Dominance

While the credit card industry is thriving, the debit card sector is facing significant challenges. According to the PwC report, debit card usage has been declining steadily, with transaction volumes falling by 33% and transaction values decreasing by 18% in FY24 compared to the previous year. This decline can be largely attributed to the rise of the Unified Payments Interface (UPI), which has revolutionized the way people make digital transactions in India.

UPI has gained immense popularity due to its ease of use, instant payment capabilities, and zero Merchant Discount Rate (MDR), making it an attractive option for both consumers and merchants. As a result, many users who previously relied on debit cards for everyday transactions have shifted to UPI, leading to a sharp decline in debit card transactions.

Another factor contributing to the decline in debit card usage is the lack of rewards and incentives compared to credit cards. Credit card providers offer a variety of rewards programs, cashback offers, and discounts, which have further eroded the appeal of debit cards. In contrast, debit cards, which typically do not offer such benefits, have struggled to retain customer loyalty in a market increasingly focused on value-added services.

Despite the challenges faced by debit cards, they continue to serve a critical role in India’s banking ecosystem, particularly for those who prefer non-credit-based payment methods. However, the shift towards UPI and credit cards is expected to continue, as consumers increasingly prioritize convenience and rewards when choosing their payment methods.

Digital Payments Surge Expected to Triple by FY29

As India moves towards a more digitally-driven economy, digital payments are experiencing exponential growth. The PwC report reveals that digital payment volumes grew by 42% YoY in FY24 and are expected to triple by FY29. This growth is being driven by several factors, including technological advancements, new business models, and increasing customer awareness of the benefits of digital payments.

The proliferation of smartphones and the expansion of internet access across India have made digital payments more accessible to a larger segment of the population. Moreover, financial literacy initiatives and the government’s push towards a cashless economy have contributed to the widespread adoption of digital payment platforms such as UPI, mobile wallets, and payment apps.

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Technological innovations are also playing a critical role in transforming the digital payments landscape. Fintech companies are developing new products and services that cater to the evolving needs of consumers, offering seamless payment experiences that are faster, more secure, and more convenient than traditional payment methods. For instance, contactless payments, QR code payments, and voice-enabled payments are gaining traction, further accelerating the growth of digital transactions.

Another important factor driving the rise in digital payments is the emergence of new business models that are reshaping the way payments are processed. The introduction of Buy Now, Pay Later (BNPL) schemes, subscription-based services, and micro-payment solutions has made digital payments more appealing to a wider range of customers. These innovations are not only enhancing the customer experience but also providing businesses with new ways to engage with their customers and increase transaction volumes.

Looking ahead, the digital payments market in India is expected to continue growing at a rapid pace, with the PwC report forecasting a threefold increase in transaction volumes by FY29. As more consumers embrace digital payments and businesses invest in advanced payment technologies, the future of India’s payments ecosystem looks promising.

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