Consumers may switch from credit cards to other payment methods to make their discretionary purchases as India enters the festive season. Here’s what the experts think,
Credit card spending in the country dropped drastically just before India’s festive season – a period of around four months typically marked by people queuing for purchases of consumer discretionary items, vehicles to household appliances. Although some credit card providers are beating the general industry trend, could it be that people are spending so much but switching to other payment methods, such as cash or online banking?
Experts believe a combination of factors could be behind the drop in monthly credit card spending:
RBI data released late last month showed a 3% sequential decline in credit card spending in India. The decline comes at the start of the festive season in the country, at a time when lenders are optimistic about a recovery in business activity given the slowdown in the early years of the pandemic.
“Digital payments are on the rise. Many consumers in middle and low income segments prefer to make digital payments. The rise of digital payments is certainly at the expense of credit and debit card payments,” Mukesh Kumar said. , COO of Shopping. Centers Association of India (SCAI), an industry body representing shopping malls across the country, said CNBCTV18.com.
“Party shopping is at its peak in all regions. Demand during the festive seasons in 2020 and 2021 has been very subdued. However, this year it has been extremely good. It’s across all categories,” a- he declared.
The availability of easier-to-use postpaid methods could drive the consumer away from credit cards.
“Buy now-pay later makes life so much easier. It’s convenient for you, and you can easily meet the set dates for making refunds to avoid additional charges… It adds to the whole experience monthly grocery shopping,” said Pratibha Sharma, a Delhi-based housewife.
“The consumer in the post-COVID world has definitely become more discerning about the exceptional expenses that used to happen before. This is because there is a new goal for the middle/upper class to save for a rainy day that wasn’t the case earlier,” Finny Jose K, founder and CEO of financial services platform Neofam, said CNBCTV18.com.
“Credit cards in the country are a very misunderstood and poorly sold product… Most users just see it as a liability,” he said.
“Many brands saw 25-20% growth in sales in 2019… Ethnic has taken center stage in some parts of the country, but it’s not limited to ethnic clothing. Shoes, jewelry , electronics and casual wear, and almost all categories, saw good traction. This is expected to continue through Diwali,” said Kumar of SCAI, whose members include Citiwalk, Lulu Mall, Nirmal Lifestyle and Oberoi Mall.
Analysts are divided on the outlook for the payments space, although some see a possible recovery in the coming months on the festive boost – which normally leads to higher consumer demand and increased spending resulting.
However, some are skeptical about whether the return of consumer demand will be reflected in credit card spending.
“People can’t use credit cards even if they want to,” said Suman Bannerjee, CIO of hedge fund Hedonova. CNBCTV18.com. He believes that any negative impact on consumer spending in general can be due to two main reasons:
CLSA has an “underweight” position in the Indian payment space. He likes SBI Card’s business model, but believes the card issuer’s future is “not as rosy as the market expects”.
SBI Card management expects credit card spending to improve over the next few months in terms of volume, i.e. number of transactions.