UPI And Personal Loans are Replacing Credit Cards in Indians’ Wallets: CIBIL Report

A new white paper by TransUnion CIBIL highlights that credit cards are no longer the primary unsecured credit product for many Indians. The growing popularity of UPI and personal loans has changed how consumers make payments and access credit. 

Although the number of credit card users has increased over the years, India still has a much lower level of credit card ownership than many other developing and developed countries. 

Credit Card Penetration in India Remains Low 

According to TransUnion CIBIL Managing Director and CEO Bhavesh Jain, India has around 5.2 crore credit cardholders, which accounts for only 25% of the country's credit-active population of nearly 25 crore. 

The report notes that credit card penetration is significantly higher in several other countries: 

This suggests there is still considerable room for growth in India's credit card market. 

UPI And Personal Loans Are Changing Consumer Behaviour 

The report says credit cards are no longer the most preferred unsecured financial product for consumers. Digital payment options such as Unified Payments Interface (UPI) and personal loans are increasingly being used instead. 

Credit cards continue to offer benefits such as reward points, but they also involve a merchant discount rate (MDR) of up to 2% on transactions. 

At present, UPI apps support only RuPay credit cards. Credit cards issued on networks such as Visa and Mastercard cannot yet be linked to UPI apps, which limits their use through the UPI ecosystem. 

Fewer First-Time Borrowers Are Choosing Credit Cards 

The report also shows that credit cards are playing a smaller role in introducing new borrowers to the formal credit system. 

Only 8% of new credit cards are issued to first-time borrowers, compared with 26% a year earlier. This indicates that many new borrowers are choosing other forms of credit before applying for a credit card. 

Credit Card Usage Has Grown Over The Last Decade 

Despite the changing landscape, the credit card market has expanded significantly over the past 10 years. 

Some key trends highlighted in the report include: 

Credit Cards are Expanding Beyond Metro Cities 

The report says younger consumers are more likely to own credit cards. It also highlights that credit card ownership is no longer limited to metro cities. More people in semi-urban and rural areas are now using credit cards, reflecting wider access to formal credit across the country. 

Read More: IDFC FIRST Bank Launches EPFO-Integrated PF Payment Service for Businesses! 

Conclusion 

While India's credit card market has grown steadily over the past decade, its penetration remains relatively low compared with many other countries. At the same time, the rapid adoption of UPI and personal loans is changing the way Indians borrow and make payments.  

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