Demand for RuPay credit cards pips Visa and Mastercard in tier II cities

UPI’s integration has resulted in an uptick in demand for Rupay credit cards in India’s Tier-2, 3 and 4  towns and cities, according to the latest consumer study by fintech platform ZET, which has over 1.5  million financial distributors. 

In June 2022, the Reserve Bank of India (RBI) allowed individuals to link their credit cards to the United Payments Interface (UPI). Consumers can now seamlessly use their credit cards to make payments. All they have to do is scan the asset lite QR codes. The payments are secure and safe, since authentication is done by using an UPI PIN. 

The report suggests that demand for Rupay credit cards went up by 37 per cent on quarter in the July-September period across India’s 706 small towns and cities. During the April- June quarter this demand went up by 23% (QoQ).  

The top-10 cities that witnessed the maximum demand for Rupay cards during the July-September quarter were Jaipur, Meerut, Surat, Nagpur, Ranchi, Raipur, Varanasi, Indore, Kanpur, and Jhansi.

The percentage of Rupay cards issued through the platform during the April-June quarter stood at 29% while Mastercard and Visa were almost at part with 36% and 35% respectively. However, in the following quarter the demand for Rupay cards surpassed those for Visa and Mastercard. Among the banks distributing Rupay cards, the most preferred were Axis Bank, HDFC Bank and SBI.

"Ever since the integration with UPI, Rupay credit cards are witnessing a rise in demand for Rupay cards across India’s Tier-2, 3 and 4 towns and cities. Almost 37% of the cards issued through the platform in India’s hinterland during the July-September quarter was for Rupay cards followed by Mastercard (32%) and Visa (31%). This highlights the increasing popularity of digital payments in the country that has now expanded to India’s hinterlands as well," said Manish Shara, Co-Founder and CEO, ZET.

Meanwhile, the total number of cards in circulation has shown a modest growth over the last 18 months. In June 2023, the total number of cards stood at 1376 billion, a 9% YoY increase. In June 2023, the number of credit cards was 88.68 million, 975.8 million debit cards and 312.1 prepaid cards; this corresponds to a YoY growth of 13%, 6% and 18% respectively, according to the latest Worldline Digital report.

 The top 5 issuers of credit cards are HDFC, SBI, ICICI, Axis and Kotak respectively and the top 5 issuers of debit cards are SBI, Bank of Baroda, Canara Bank, HDFC and Bank of India. 

The contrast between private sector banks dominating credit card issuance and public sector banks dominating debit card issuance is clear suggesting the risk appetite among the former is higher while the latter is focused on providing accounts to a larger section of the population including the unbanked. 

For credit cards, 70.1% were issued by private sector banks and 24.1% by public sector banks while 67.4% of debit cards were issued by public sector banks and 22.6% by private sector banks in the first half of 2023. The balance was issued by payment banks, small finance banks and foreign banks.

In contrast to card transactions, the volume of card transactions in H1’23 was 3.64 billion, a fall of 8.9% from H1’22 driven primarily by debit cards followed by prepaid cards. In contrast, credit card transactions saw an upswing. Credit card transactions in H1’23 were 1.550 billion, a significant increase of 19.6% when compared to H1’22.

"This same pattern is repeated in the value of transactions and it appears debit card transactions are/were a casualty of the upswing in UPI transactions while prepaid could be a mixture of UPI transactions as well as the guidelines on prepaid cards issued by the RBI in June 2022; prepaid card transactions have seen a steady decline in both volume and value since then. Credit card transactions which are usually used to make payments of higher value transactions such as for white goods, travel etc have not been affected," noted the report.