The Indian consumer is gradually warm up to expenses through debit cards as more point of sale terminals (POS) at merchant establishments are becoming debit card compliant. Besides, debit card is also emerging as a preferred transaction tool for e-commerce payments.

Sample: There are 19 crore debit cards in the system. While there are only around 1.9 crore credit cards. The mix of cards in the system has undergone a sea change in the last two years. While 80 lakh debit cards have been added in the past year, more than one crore credit cards have been withdrawn or cancelled for non-payment of dues.

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Moreover, the share of debit cards in total card spend has gone up sharply from just about 17% in FY08 to 30% in FY10. This fiscal too, consumer spend through debit card has grown, with its share in total card spend going up to 32% as of end June 2010, according to the Reserve Bank of India data.

According to B Amrish Rau, V-P and country head, First Data Corporation, which has a joint venture with ICICI Bank for point of sales terminals, “Consumers are warming up to using debit cards at merchant location as they perceive it to be a more secured and a hassle-free way of transaction. Moreover, increasingly, it is also used for settling e-commerce transactions.”

E-commerce transactions have been growing by over 30% annually, with a lot of travel bookings shifting online. Going ahead, a lot transactions for insurance premium payments and mutual fund investments are expected to be big avenues for e-commerce where debit card usage is expected to pick up sharply, he added.

Banks on their part have also been coming out with attractive offers on debit card issued by them by giving a cash back offer on purchases at certain places and discounts at retail outlets, which is also making debit card an attractive payment option. Interestingly, most banks started actively focusing on this business when facing problems of recovery in their credit card business, post the 2008 sub-prime crisis.

According Maitri Kumar, head of marketing, HSBC India, “We focused on debit cards as we observed that a customer using a debit card actively is likely to have a deeper relationship with the bank. And, to engage the customer, we made them offers and ran usage campaigns which have worked well. We have an equal focus on both credit and debit cards as they meet different customer needs.

In an environment where credit limits have been pruned, debit cards are a good option as they give purchasing convenience and access to ready cash. However, credit cards still account for a chunk of transactions and it will still be a long way to go for debit cards to overtake credit cards.”

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