Rising credit card and UPI payments indicate increase in consumption: Experts

Rising credit card and UPI payments indicate towards increase in consumption amid recovery in economic activities with ebbing impact of Covid pandemic, said experts and market players.

As per the RBI's monthly data, Unified Payments Interface (UPI) transaction increased from Rs 9.83 lakh crore in April this year to Rs 10.73 lakh crore in August.
Similarly, credit card spends through PoS (Point of Sale) terminal increased from Rs 29,988 crore in April this year to Rs 32,383 crore in August. The credit card spending on e-commerce platforms, which was valued at Rs 51,375 crore in April, rose to Rs 55,264 crore in August.

Rama Mohan Rao Amara, MD and CEO, SBI Card, said the outstanding on credit cards has grown at a Compounded Annual Growth Rate (CAGR) of 16 per cent between FY17 and FY22, as per the RBI's industry data.

"With the increased adoption and use of credit cards, there has also been an increase in spends. Over the last few months, the industry has seen monthly credit card spends crossing Rs 1 lakh-crore quantum consistently, indicating a robust consumption pattern. With the upcoming festive season, there is expectation and anticipation all around," he said.

Experts and market players are of the view that the increase in volume and value of digital transactions bode well for the economy. It also indicates that consumers are increasingly becoming familiar with different modes of digital payments, and giving up their inhibitions.

Anand Kumar Bajaj, founder, MD & CEO, PayNearby, opined that the increase in volume and value of payments through cards and UPI paints a positive picture of the digital payments landscape in the country.

The spurt, he said, indicates that Indian consumers are letting go of their inhibitions and becoming more open to online payment adoption.

"As consumers and merchants have experienced the ease and security of digital payment modes, it has brought a behavioral shift in them. Aiding this growth is the increasing familiarity and convenience of e-commerce platforms where consumers are making more online purchases," Bajaj said.

The government's push to digital transactions, rising income, increasing use of smarthpones and improvement in internet connectivity are aiding the growth of online payments. Besides, more and more merchants are deploying digital payment infrastructure.

According to Mandar Agashe, MD & vice chairman, Sarvatra Technologies, the rise in expenditure levels implies a pickup in consumption as the pandemic-induced uncertainty almost dissipates and markets return to normalcy.

"July and August were primarily marked by sale seasons across e-commerce platforms and various offers made accessible by merchants to encourage transactions via UPI. UPI is further expected to boom during the current festival season due to rising demand from Tier-II and III towns confidently embracing the UPI channel for their transactions," Agashe added.

Anurag Sinha, CEO & founder, OneCard & OneScore, said the rise in both volume and value of payments in recent months across platforms clearly reflects the strength of the retail economy as well as the revival of consumer confidence.

Last month, the Reserve Bank of India had sought views from the public on fees and charges in payment systems, with an aim to make such transactions affordable as well as economically remunerative for the entities involved.

Charges in a payment system are the costs imposed by the Payment Service Providers (PSPs) on the users (originators or beneficiaries) for facilitating a digital transaction. The charges are recovered from the originators or the beneficiaries depending on the type of payment system.

Ranen Banerjee, Partner - Economic Advisory Services, PwC India, said the increase in UPI transactions bodes well for the economy but "we possibly cannot directly correlate" it to consumption as there are several factors that are leading to more digital transactions -- the primary one being e-commerce growth.

"The growth in credit card spend and not on debit card spend can be viewed from two lenses. One that the households are spending more or the second that they are stressed and they are depending on credit," Banerjee said.

Market players further said traditionally, travel, entertainment and restaurant category is one of the key categories for consumers when it comes to online spends through credit cards.

"With the easing of travel restrictions, we have also witnessed a spike in travel spends during the summer season. Spends in this category have now crossed pre-Covid levels," said Amara.