A Mastercard Inc. chip credit card is arranged for a photograph in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)

Share Of Card Payments Slides As Customers Take To Mobile Transactions 

Looking to make a digital payment for a cup of coffee or purchase an air ticket online? You can choose to pay using a credit or debit card. But you can also whip out your mobile phone and pay with a bank app or a prepaid wallet.

With the expanding suite of digital payment options, the hold that ‘plastic money’ or credit and debit cards had over customer spending is slowly reducing.

The share of card payments fell to less than half of retail digital payments in the 12 months till January 2019, shows data from the Reserve Bank of India compiled by BloombergQuint.

The share of card payments stood at 49.36 percent for the 12 months until January 2019, compared to 81.5 percent in the 12 months until January 2015. The share of mobile payments has risen to 27.9 percent compared to just 3.5 percent four years ago. Transactions via platforms like National Electronic Funds Transfer, Immediate Payment Services and others make up the rest of the digital payments pie.

For the purpose of this analysis, BloombergQuint included debit and credit cards used at ATMs and at point-of-sale to calculate the share of card payments. Wallets and mobile banking applications were included in the mobile payments category.

To be sure, this categorisation may include overlaps between different categories and may not provide a full picture. For instance, peer-to-merchant transactions included in mobile banking may skew the picture. A detailed break-up of such transactions is not disclosed. Similarly, card transactions at ATMs may slant the data on card usage.

The increase in share of mobile payments is a consequence of faster growth, albeit on a smaller base. While digital payment volumes grew by 18.6 percent on average over the past one year, mobile payment volumes grew nearly five times as fast, at 97.5 percent.

The simplicity of mobile payments will continue to attract customers, said AP Hota, a consultant with Swift India Domestic Services Pvt. Ltd. Hota formerly led the National Payments Corporation of India.

“Mobile payments and m-wallets continue to disrupt the payments systems because of the simplicity of operations, diversity of players, huge investments and constant innovation,” Hota told BloombergQuint. However, cards will remain relevant in India for some more time even though internationally there is already a debate over the extinction of cards, Hota said.

Declining Share Of Spending

The share of mobile transactions in the value of digital transactions remains small since such payments are typically of lower-ticket sizes. Still, it is rising while the share of cards is falling.

In value terms, card payments saw their share decline to 13.9 percent, based on the 12-month average until January 2019. Four years ago, this share stood at 28.6 percent. The share of mobile payments in the value of digital transactions has risen to 8.2 percent compared to less than 1 percent four years ago. Retail electronic clearing systems, most significantly NEFT, accounted for most digital payments in value terms.

Card payments in value terms grew at 20.1 percent on average over the 12 months till January 2019, in stark contrast to mobile payments that rose 84.2 percent.

Vijay Jasuja, the former chief executive officer at SBI Cards told BloombergQuint that the process of obtaining a card remains relatively complex and technology such as ‘host card emulation’ has been delayed in India. For these reasons, the share of card payments is declining. Host card emulation permits virtual representation of cards by allowing a mobile device to mimic a payment card.

However, Jasuja believes that the use-case of credit cards remains high due to the ‘credit’ feature.

Credit is peculiar and unique to credit cards, while users still use their own money on payment apps...Secondly, constant updation of security features means that user confidence is higher in card payments.
Vijay Jasuja, Former MD & CEO, SBI Cards

Traditionally, India was not a “credit forward” nation and customers had limited credit history, said Vivek Belgavi, Partner and FinTech Leader at PwC India. This restricted penetration of credit cards.

In contrast, payment systems such as the Unified Payment Interface are correlated with mobile phone penetration and internet connectivity. Improved phone and internet connectivity have created a conducive environment for mobile payment, Belgavi said. What could speed up the decline of cards is “hybrid models” where credit is built in to wallets and small credit is offered digitally along with payment options, he added.

Mobile payments will eventually account for a higher share of digital payments than those by card.
Vivek Belgavi, Partner and India FinTech Leader, PwC India

Note: This story has been modified to add a qualifying statement to the data analysis. which may include some overlaps.