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An Empirical Analysis of Payment Card Usage in India

A paradigm shift in the modus operandi of commerce across the globe has been significantly influenced by the payment card industry with brisk strides in digital technology. The blooming payment card industry has escorted the prosperity in economic growth of most of the countries. Besides, there exists a divergent level in subsuming card payment by different countries due to distinct social, economic and cultural background. In India, excessive use cash payments are due to offbeat business models and varied distinction in literacy levels. This paper aims to analyse outstanding payment cards in India by examining the number of cards in operation and the value of transaction in the past decade. Data from RBI source is collected to analyse for a period of eight years (2011-2019). The research finds that credit card penetration has increased by threefold with average growth of 15% YoY and debit cards increased by more than threefold with average growth of 19% YoY during the period of analysis. Yet, asymmetry between debit cards holders and credit card holders exists in India indicating credit card is still niche product. This provides platform for the payment card industry to unleash the potential to tap market in India.


INTRODUCTION
Electronic payments enhance economic efficiencies by making payments conveniently and reducing time thus imparting further economic and social development. In developed countries, there exists high penetration of payment cards resulting in paperless transactions. On the other hand, for developing countries, the benefits will be notable by increasing penetration.
Nevertheless, repercussion will build upon the present situation of the payments infrastructure, government regulation, consumer education, and competition within the Industry. India, which was predominantly a cash economy, is slowly adopting digital banking. According to MasterCard Advisors report (2013), 98% of all its economic transactions are done through cash payments in India. In recent past, there is rapid expansion in payment card consumers, thereby slowly moving towards cashless society.
With the objective to curtail money laundering and terror financing, Indian government on November 8, 2016 announced demonetization of high value notes. Significant reforms in economy were expected by economists, business leaders, professionals, and bankers across the world. According to NPCI reports, India has witnessed a four-fold growth in digital transaction from 145.46 million in December 2017 to 620.17 million transactions worth Rs 1,02,59.48 billion in December 2018. This is the highest number of transactions and amount recorded since the inception of UPI back in August 2016. According to Mckinsey's report of world payments report (2017), Asia-Pacific region accounts for nearly three-quarters of global payment transactions. It forecasts that Asia-Pacific cash-intensive economies (India and China) will undergo robust growth in digital transactions.
The digital payments usage across the world was conducted by Fintech futures considering twenty developed markets. The study took into consideration number of debit and credit cards issued per capita, usage of cashless methods, growth of cashless payments, and customers availing mobile payment services. The rank computed based on the above stated metrics is exhibited in Table 1. The aim of the research is to analyse the payment card usage trends in India over past eight years. This paper is organised as follows: Section II presents literature review; Section III explains the digital payments available in India. Section IV analyses the Payment card industry in India, followed by Summary and conclusion presented in Section V.

II. LITERATURE REVIEW
Literature review has been conducted on various aspects of payment cards at different periods and different countries.
Maji et. al. (2019) desired to gain insights into market share of payment cards, position in market with respect to card payments, geographic location-wise business profiling, competitor's customer segmentation based on monthly card usage, monthly amount spent and much more. Hence they came up with framework of analytical processing which are useful for business. They suggested storing transactional data and constructed data warehouse to POS provider is useful for business gain. Dimitriadis et. al. (2018) scrutinised 321 bank customers by classifying them into groups based on discriminant analysis and decision tree models to discover the inclination of usage of payment means. Results indicate that, by using discriminant analysis to classify the customers in a more effective way than the decision tree method.
Ding and Wright (2017) investigated the price discrimination among payment service providers in European countries. They conclude that there is  Kosse and Jansen (2013) inspect payment choice of Dutch and migrants of Netherlands to Dutch. They observe the cash payment still dominates in first generation migrants. The payment behaviour is influenced by host country habits and transferred between generations.
Carbo-Valverde and Linares-Zegarra (2011) evaluates the strategic reward programs by card issuers to increase the transactions of electronic payment through cards in Spain. The paper reveals that incentives vary across merchants and is more effective for debit cardholders.
Amromin and Chakravorti (2009) argue that there is expansion in merchant card acceptance and rewards provided for payment through cards. This has ushered customers to make electronic payment through payment cards. Borzekowski et. al. (2008) concludes that cash transactions are complemented by debit cards compared to credit cards in United States. They used open ended questions and found that convenience is the prime reason for using debit cards and the probability of using debit cards elevates with educational qualification and diminishes with age. Rysman (2007) conducts empirical analysis on the payment card industry in U.S. He establishes the fact that consumers concentrate their spending on a single payment card and keep unused cards that allow the ability to use multiple network.

III. DIGITAL PAYMENTS AVAILABLE IN INDIA
The Digital India Initiative was launched under the flagship of Government of India in 2015. The mission is to transform India into a digitally empowered society and knowledge economy. Following are the different methods of digital payments available in India.

Banking cards:
It includes debit cards, credit cards, pre-paid cards and travel cards or international cards.

Unstructured Supplementary Service Data (USSD) Channel:
This service allows access to mobile banking services through basic feature mobile phone. There is no need to have mobile internet data facility for using USSD-based mobile banking. The customers can avail the service by dialling *99# Balance Enquiry.

Aadhaar Enabled Payment System (AEPS):
It allows online interoperable financial transaction at POS (Point of Sale) through the Business Correspondent (BC)/Bank Mitra of any bank using the Aadhaar authentication.

Unified Payments Interface (UPI):
It is a system which combines multiple bank accounts into a single mobile application seamless into one. Each Bank provides its own UPI App for Android, Windows and iOS mobile platform(s).

Mobile Wallet:
It is a way to carry cash in digital format. The card (credit or debit) information can be linked in mobile device to mobile wallet application or money can be transferred online to mobile wallet. Payments can be made through Smartphone and tablet instead of using your physical plastic card to make purchases.

A Point of Sale (POS):
Also called as point of purchase, is the place where sales are made and customer completes a transaction, such as a checkout counter. It can be Physical POS and mobile POS.

National Electronic Fund Transfer (NEFT):
It is a scheme offered to Customers for electronically transferring funds from any bank branch to any individual having an account with any other bank branch in the country in batches.

Real Time Gross Settlement (RTGS):
It is similar to NEFT of electronically transferring funds. However, there is gross settlement where the transaction is settled on an instruction by instruction basis mostly used for high value transactions.

Electronic Clearing System (ECS):
It is an electronic mode of funds transfer from one bank account to another used by institutions for periodic payments.

Immediate Payment Service (IMPS):
It is an instant real-time inter-bank electronic funds transfer system which offers service through mobile phones. Hence the service is available 24/7 throughout the year including bank holidays unlike NEFT or RTGS. This section of paper presents the empirical analysis of payment card usage in India from 2011-2019. The secondary data is collected from RBI bulletin for each month over past eight years. It inspects the number of debit and credit cards outstanding issued in India at the end of each financial year. It also aims to compare number of card transactions of payment cards (both debit and credit) and the amount involved in the transaction.     Table 3 above indicates that number of transactions of credit and debit card has proliferated along with the transaction values. The credit card transactions have risen by five times, from 320.42 million in 2011-12 to 1.77 billion in 2018-19. The transaction value has inflated by six times from Rs. 978.72 billion to Rs. 6.07 trillion, which is relatively high compared to increase in number of transactions. Simultaneously, the debit card transactions have also increased from 5.40 billion in 2011-12 to 14.27 billion in 2018-19, which amounts to around three fold increase. The transaction value has also surged at same pace of around three fold, from Rs. 14.21trillion to Rs. 39.04 trillion.

V. SUMMARY AND CONCLUSION
The study is aimed to analyse the trends of payment card usage in India. The data was collected from RBI website for period of eight years from 2011 to 2019. By the financial year ending 2018-2019, there are around 47.09 million credit cards outstanding indicating threefold growth and debit cards outstanding is 924.63 million manifesting more than threefold growth.
The number of outstanding credit cards is expanding every year with liberal expansion of credit limits and prerequisites by bank and stringent measures by Government. CIBIL, a credit information company operating in India, provides CIBIL score which is easily accessible by citizens and credit card issuing institutions. From the analysis it is evident that there are around 95% debit cards holders and only 5% credit card holders in India indicating it is still niche product.
Looking at the report, cardholders (credit and debit card), transactions, and transaction value have increased tremendously. The total transaction amount in debit cards in 2018-19 is consolidated to Rs. 39.04 trillion and credit cards are consolidated to Rs. 6.07 trillion. The magnification of debit cards shot up by 40% in the year 2014-15 because of policy implication. The Government of India undertook national mission of financial inclusion by opening Jan Dhan accounts and issuing debit cards. There was dip in transaction value to 0.18% in year 2016-17, besides remarkable increase in number of operating debit cards to 18.56%. This was the effect of policy of restricting amount to be withdrawn and number of transactions due to demonetization.
The Government of India reported the key achievement of demonetisation as lower cash-to-GDP ratio. The cash to GDP ratio is the ratio between the public debts incurred by the government to its gross domestic product. The ratio reduced from 12% to 8% due to reduction of currency circulation to the extent of Rs 3.89 lakhs crore as claimed by Government of India. According to Nasscom report, still less than 30% of population in India are unbanked, and hence growth opportunity is very high. Finally, the question boils down whether to have cashless economy or less cash economy.