India's debit card user base was 33.10 Crore,while the credit card base
was 1.95 Crore people at the end of the last fiscal year.Card use has been
growing at about 30% per year.
Countrys top 8 retail chains say credit, debit card payments exceeding
cash transactions
Plastic is overtaking cash in Indias modern retail stores and, in many
instances, has already done so,which should bring cheer to the Reserve Bank of
India (RBI) and the central government because it means controlling fake
currency & black money becomes proportionately easier.
The countrys top 8 retail chains across formats Future Group, Shoppers
Stop, Spencers, Wills Lifestyle, John Players, Woodland, Next and The Mobile
Store said credit & debit card
payments have consistently exceeded cash this year in the countrys biggest
cities,dispelling the notion that Indian consumers prefer cash and reflecting
the maturing of consumer behaviour in urban markets.
Plastic money has the advantage of convenience & safety. There
is,hence, a reduction in the cost of printing money, said CARE Ratings chief
economist Mr. Madan Sabnavis. It also
leaves an audit trail, which in turn helps to track large volume transactions.
This controls the growth in the black economy too.
Future Retail joint managing director Mr. Rakesh Biyani said plastic
money is the new cash, with payments through debit & credit cards growing
at 7% to 8 % year-on-year in the past 2 years.
Shoppers Stop managing director Mr. Govind Shrikhande said the trend has
been fuelled by the convenience of plastic money over carrying cash.The
Shoppers Stop department store chain & Future Retails Central and Brand
Factory fashion outlets said sales by card now account for almost 55 % of the
total.
At shoe and apparel retailer Woodland, payments through plastic money
account for almost 52 % of total transactions.
At food and grocery chains like Spencers Retail, plastic is at 52 % in
city stores.
At Big Bazaar and Food Bazaar, plastic is set to almost equal with cash
at 40 % of transactions.The rest comes from corporate vouchers such as Sodexo
and Edenreds Ticket.
The adoption of plastic money is being driven by younger shoppers, an
increasing share of working women, easier credit availability and a rise in
impulse shopping, said Mr. Atul Chand, chief executive of lifestyle retail at
ITC who manages two formats Wills Lifestyle and John Players.This is being
fuelled by stronger loyalty programmes & benefits offered by banks, he
said.
To be sure,this could mean that consumers are racking up debt, while, on
the other hand, it gives the economy a boost & the Central government benefits from service
tax on credit card transactions. RBI data show that about a third of non-cash
transactions in the financial system are being made through plastic money.
CARE Ratings Sabnavis said the central bank RBI data reflect the maturity
of the system as well as users. As we move to a larger share of the organised
sector, usage of cards will increase, he said.
RBIs effort to enhance the security of card transactions has also
encouraged usage. It has mandated banks to send SMS alerts, issue chipbased
cards and provide additional authentication levels.
RBI told banks to facilitate biometric verification based on the AADHAAR
system as an additional precaution.In electronics retailing, plastic money
adoption went up significantly this year with brands such as Apple, Samsung, LG
and Sony introducing a series of easy EMI schemes on credit cards.
Credit card transactions have risen 5 % to 6 % in the past year and
account for almost 56 % of the total, said Mr. Himanshu Chakrawarti, CEO of The
Mobile Store, the countrys largest cellphone retailer.
In fact, RBIs recent clampdown on zero percent EMI schemes in credit cards has only
marginally impacted sales through this route, by just 2 %, since it is still
the most easy way for consumer finance with the base of users widening every
year, Mr. Chakrawarti said.
Retail chains said consumers tend to spend more when buying through
credit and debit cards. At Wills Lifestyle,the transaction value is 20 %
higher,while at Future Retail it tends to be 25 % more.
The average billing value through credit and debit cards at The Mobile
Store at Rs. 16,000 is twice the Rs. 8,000 of cash purchases.The successful
adoption of plastic money in modern retail is also encouraging small,
neighbourhood stores to install card swipe machines,said Mr. Kumar Rajagopalan, CEO, Retailers Association
of India grouping.
As inflation goes up,the amount of money required for a transaction will
go up, thereby only increasing the popularity of cards, he said, adding that
plastic money accounts for almost 80 % of transactions in the West.
Src: ET
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