Contraction in Card Payments in India

Card payments can shed a great deal of light about consumer demand. In India, debit cards are a more popular form of card payment as compared to credit cards due to the stringent pre-requisites needed for the latter, while the former can be issued with only a bank account.

However, the share of credit cards has increased from 8% in 2016 to 14% in 2020. The volume of card payments has increased over the years, but there has been a sharp contraction in the payments since November 2019 in both volume and value, as banks transitioned to chip-based cards from magnetic-strip cards, due to a directive issued by the Reserve Bank of India.

Hence, card transactions contracted to one third of its volume in November 2019 as compared to October 2019. The year-on-year values also declined by an average of 63% between November 2019 and October 2020, because of the high base effect. The decline narrowed in November 2020 as the base effect died out but is yet to register an increase.