Credit card: Trends to lookout for in 2022

The year 2021 witnessed an upsurge in digital transactions, which has also resulted in the rise in credit card usage. One can associate multiple factors to this, ranging from digitalized operations catalyzed by the pandemic, enhanced reach of e-commerce industry and ability of service providers to offer rewarding services. While the credit card circulation in India grew moderately to 64 million in 2021, the overall penetration remains at just 5% of the country’s population. 

This under penetration poses a huge potential for the service providers to reach out to the underserved customer base. The credit card facility not only provides convenient financing but also contributes towards building substantial credit history for relatively new to credit borrowers, further opening varied valuable credit avenues.

Considering the implications of credit card utility in the country’s financial inclusion imperative, it is critical to understand the trends that will shape the industry in 2022. The industry has evidently set on an upward trajectory as 13,36,000 new credit cards were added in October 2021 alone, swelling the total credit card base to 6.64 crore which is an annualized growth of  11.7 percent growth, the highest in the past 14 months. The year 2022 will surely witness a continuance in this momentum, with the economy inching towards normalcy. There has been a visible rise in the customers’ demand for the traits of convenience and quickness in varied financial processes. It only logically follows that the facility providers will focus on quicker activation with improved access to credit at better rates and seamless checkouts. 

This is bound to resonate with users’ increasing financial awareness regarding benefits of the credit tool, resulting in its larger adoption rates. A recent survey by BankBazaar on the credit card usage in 2021, reflected an increased adoption rate among the lower age brackets. The below-25 years age group have been aggressive in adopting credit cards and grew strongly at 175 per cent compared to all other cohorts, which grew at roughly 100 percent. This indicates the increasing awareness of the credit tool across age groups. Further, the demand for credit cards have grown in non-metro cities

Coming fiscal will see this momentum to be sustained on the back of hugely lucrative offers, characterized by higher degree of personalization,  by entities like e-commerce service providers, among others. During the past couple of years, the dependence on online shopping rose significantly, even more owing to the lockdown-like situation. The customized rewards, cashbacks, and offers on online and offline shopping for essentials, luxury, lifestyle spends, and entertainment, have rendered card usage during shopping cards highly attractive. 

For instance, the demand for cards which provided benefits on the fuel in the past year, a reflection to the rising fuel prices during the period. Also, offerings like Buy Now Pay Later (BNPL) have been received well by the customers.  The surging popularity of these products can be related to their ability to offer flexibility to the borrowers, allowing them to plan their finances in an effective manner. Cashless transactions have emerged to be a choice of transaction for customers, in the past couple of years, which will certainly influence the digital credit landscape in the time to come. Financial institutions have already realized this and one can foresee that the banks and traditional NBFCs will strive to adopt the nuanced approaches of profound players like neo-banks. 

Credit cards reward customers for a wide range of purchases in the form of merchant discounts and offers. Also, the prudent use of the tool allows users to save and plan the expenses effectively. Considering these perks, the popularity of credit cards is only bound to rise in the year 2022.

The article has been written by Madhusudan Ekambaram, Co-Founder & CEO, KreditBee and Co-Founder, FACE