Author: Mayur Shetty, TNN
Publication: The Economic Times
Date: March 27, 2017
Introduction: Customers of Small PSU Banks Driving Change
Debit cards have conclusively displaced credit cards as the primary mode of payment in the country following demonetisation. Until October last year, despite outnumbering credit cards by a factor of more than 25, debit cards accounted for only 42% of the total card spend. This has jumped to 60% after demonetisation, which was announced on November 8, 2016.
The change is largely driven by small public sector lenders like Oriental Bank of Commerce and Punjab & Sind Bank, where usage of cards has gone up nearly five times. Debit card transactions tripled— from October 2016 levels —in December. However, with remonetisation, the transactions in January slipped to double those in October last year.
Last October, public sector banks saw transactions worth Rs 10,893 crore from the 61.7 crore debit cards they had issued till then. As against this, private and foreign banks had reported transactions worth Rs 11,048 crore although their debit card base was much smaller at 12.25 crore.
This has changed after demonetisation. In January this year, public sector banks reported debit card transactions valued at Rs 29,339 crore against Rs 19,664 crore worth transactions recorded by debit cardholders of private banks.
Pre-demonetisation, in October, for every 100 debit cards in circulation there were only 19 transactions in a month. This jumped to 54 transactions a month in December, but dropped to 40 a month in January 2017. Bankers point out that if debit cardholders use their cards even once a month on an average, the share of debit cards in transactions will cross 80%.
According to payments companies, while some of the debit card usage might moderate due to remonetisation, they are seeing stickiness in utility and petrol bill payments and travel bookings.
Public sector bank customers in smaller cities are expected to drive the debit card usage. "In smaller towns debit card is the only instrument a customer has," said an official with the National Payments Corporation of India (NPCI).