Credit Card Transactions - India

Euromonitor International : Country Sector Briefing

March 2007
Credit card transactions India

List of Contents and Tables

Headlines.................................................................................................................................................................. 1

Trends....................................................................................................................................................................... 1

Competitive Landscape........................................................................................................................................... 2

Prospects .................................................................................................................................................................. 2

Sector Data............................................................................................................................................................... 3
Table 1 Credit Cards Sector Performance: 2001-2006.................................................................... 3
Table 2 Credit Cards Sector Performance: % Growth 2001-2006 .................................................. 3
Table 3 Personal Credit Cards Sector Performance: 2001-2006 ..................................................... 3
Table 4 Personal Credit Cards Sector Performance: % Growth 2001-2006.................................... 3
Table 5 Corporate Credit Cards: Sector Performance: 2001-2006.................................................. 3
Table 6 Corporate Credit Cards: Sector Performance: % Growth 2001-2006 ................................ 4
Table 7 Credit Cards: Number of Cards by Issuer 2001-2005 ........................................................ 4
Table 8 Credit Cards: Number of cards by Operator 2001-2005 .................................................... 4
Table 9 Credit Cards Transactions by Acquirer 2001-2005............................................................ 4
Table 10 Credit Cards Transaction Value by Operator 2001-2005................................................... 5
Table 11 Personal Credit Cards Transactions by Acquirer 2001-2005 ............................................. 5
Table 12 Personal Credit Cards Transaction Value by Operator 2001-2005 .................................... 5
Table 13 Corporate Credit Cards Transactions by Acquirer 2001-2005 ........................................... 5
Table 14 Corporate Credit Cards Transaction Value by Operator 2001-2005 .................................. 6
Table 15 Credit Cards: Forecast Sector Performance: 2006-2011 .................................................... 6
Table 16 Credit Cards: Forecast Sector Performance: % Growth 2006-2011................................... 6
Table 17 Personal Credit Cards: Forecast Sector Performance: 2006-2011...................................... 6
Table 18 Personal Credit Cards: Forecast Sector Performance: % Growth 2006-2011 .................... 6
Table 19 Corporate Credit Cards: Forecast Sector Performance: 2006-2011 ................................... 7
Table 20 Corporate Credit Cards: Forecast Sector Performance: % Growth 2006-2011 .................. 7

Euromonitor International Page i

Credit card transactions India

CREDIT CARD TRANSACTIONS IN INDIA

HEADLINES
• Credit cards show robust growth, with the number up 35% in 2006
• Stronger growth in corporate sector Transaction value and volume each grow by around 36% in 2006
• Banks focus on Tier II and Tier III cities, because of huge untapped potential
• ICICI bank maintains lead through aggressive marketing
• Debt-averse Indians, a limiting factor for credit card companies

TRENDS
• The value of credit card transactions grew by 36% in current terms in 2006, to Rs447 billion. There were
approximately 26.5 million credit cards in India in 2006, up 35% from 2005. The number of transactions
also showed robust growth of 36%, to reach about 149 million in 2006.
• The banks have realised that by just having a large number of cards in circulation is not enough and does
not serve the purpose. The trend in the metros and other major cities is that many people have 4-5 cards
each, but only one is used regularly. The credit card companies have flooded the market in order to increase
their circulation. A lot of the issuers came up with schemes, for example, not charging the customer an
annual fee, but this does not help them at the end of the day if the card remains inactive. The key is to
encourage card usage. The issuing banks are thus offering incentives to encourage card usage, such as
discounts, benefits, loyalty points, cash back etc.
• Many card holders use credit cards for ease of purchase but are adverse to utilising the revolving credit
functions so as to avoid interest charges. This too does not prove too profitable for the card issuers. [
• Corporate credit cards showed very healthy growth in 2006, with the value of transactions growing by 47%
in current value terms and transaction volume up by a strong 50% from 2005. Corporate credit cards were
the driver of growth in credit cards in 2006. With a booming economy, the corporate sector is on an upward
trend and this translates into more corporate spending, which is very good for the card companies. The
banks are now focusing on the corporate sector for promoting their credit cards. They are aggressively
marketing their cards through a corporate and institutional sales team and by offering better bulk discount
schemes to the corporates. Predominantly, the foreign banks have a strong presence in this sector, with only
ICICI Bank worth mentioning among the Indian banks. The corporates find credit cards convenient, the
primary reason being the ease of usage for employees. Moreover, they also have the benefit of revolving
credit, and the bulk discounts offered by the card companies are an added attraction.
• At the start of the survey period, credit cards were seen only in the metros and other major cities of India.
Now, the banks are focusing on the Tier II and Tier III cities and are also promoting card usage among the
general population. The banks are not just issuing cards but are also taking steps to ensure that these cards
do not remain inactive by creating avenues for their usage. State Bank of India has a first mover advantage
in the smaller cities in this regard, as its name is trusted among the Indian public. ICICI bank is also trying
to tap this territory. The banks are also encouraging the merchants to increase their point-of-sale
acceptance. Merchants are running attractive schemes for the customers paying by credit card, to lure them
into their outlets. The banks are promoting low-cost terminals in a bid to encourage merchants to install
these at their outlets. These terminals are installed at the merchants’ outlets by the banks and card
companies.
• Indians, by nature, are unwilling to take on debt and this is the major reason why India is primarily a debit
card-driven economy. 40% of credit card holders do not use their cards and another 40% do not use
revolving credit. Thus, only 20% of the cardholders actually generate revenue for the banks, of which some
are defaulters. This is the primary reason why in India, credit cards take much longer to break even,
approximately three years versus less than a year in the US or Singapore. Some of the banks are now trying
to find ways to increase revenue. They do not want to increase the interest rate as this might deter card
usage and are therefore exploring other means. In May 2006, Standard Chartered slashed its interest-free
credit period by a few days (from 52 days to 47 days). The company also increased the cost of using the

Euromonitor International Page 1

Credit card transactions India

card in foreign locales. Other banks are expected to follow suit. This is done in a bid to improve
profitability.

COMPETITIVE LANDSCAPE
• In 2004, ICICI Bank overtook Citibank in terms of credit cards in circulation, through its aggressive
approach of direct marketing, advertising and promotions. ICICI Bank was the first bank to resort to large-
scale publicity to improve its visibility. The bank has extended its lead, with 26% of credit cards in
circulation in 2006. Citibank has retained second position with a reduced 16% share, with Standard
Chartered ranking third with 12%. State Bank of India’s share strongly grew in 2006, to 11%. Among the
operators, Visa has a clear lead with more than 55% market share; MasterCard ranked second with 39%.
• The public sector banks have also started aggressive efforts to promote their credit cards. They are
employing sales teams and telemarketers and are also running several advertising and promotional
campaigns in a bid to draw customers. The number of State Bank of India and Canara Bank credit cards in
circulation strongly grew in 2005, by 50% and 74% respectively, and each increased its markets share.
These banks are concentrating on the semi-urban and non-metro cities of India where they already have a
presence. These cities have low credit card penetration and have affluent consumers. Thus these offer good
potential, and with an increase in merchant acceptance, the issuing banks are taking full advantage to
increase their circulation.
• A few of the card issuing banks have come up with another strategy to increase their revenues, by targeting
the affluent class by developing special cards just for them. These cards are marketed as a prestige card, so
as to make the holders feel special. Many of these cards have membership by invitation only. These cards
have a high annual fee and in turn come with many add-on benefits. In this category, Citibank launched the
super-premium “Black” category of cards in early 2005. Citibank Ultima and Diners Club Elite cards are
such cards and membership is by invitation only. These cards have an annual membership fee of Rs50,000
and come with five free Citibank Ultima supplementary cards. The members are also enrolled into CitiGold
Wealth Management and have access to a personal relations manager who assists them in their investments
and personal finances. These cards also come with a Personal Accident Air cover of Rs10 million and have
features such as a credit limit of Rs1.5-2.5 million and cash withdrawal up to Rs250,000.
• All issuers are now heavily into co-branding their credit cards with various companies. This gives them
better scope and also helps in their promotion and advertising, thus increasing usage. The most popular
partner in co-branding is the airlines. Almost all issuers have at least one co-branded card with an airline;
ABN AMRO with Indian Airlines, Citibank with Jet Airways, Standard Chartered with Air Sahara, to name
a few. In February 2006, SBI teamed up with Indian Railways to launch a co-branded credit card and
traveller loyalty card to tap the railway passengers market. In 2006, Tata Group along with SBI and
MasterCard launched India's first ever Credit cum Coalition Loyalty Card. Card holders receive the dual
benefit of having an international credit card along with the rewarding membership to India's first ever
Multi-Brand Coalition Programme — The Tata Privilege Programme. The members are rewarded through
Tata Reward Points. The Tata Privilege Programme is a unique partnership of leading brands across popular
categories including airlines, automobiles, books and publications, departmental stores, durables, fuel,
groceries, hospitality and fine dining, insurance, jewellery, watches and accessories, and power and
telecom. It offers the members the advantage of several loyalty programmes all packaged into one card. The
Programme also entitles them to priority offers and exclusive benefits from participating Partner Brands.
Moreover, the members are not limited to redeeming their points at any one store or through a redemption
brochure but can actually shop with any participating brand and redeem points instantly.

PROSPECTS
• The number of transactions is estimated to grow at a CAGR of 16% over the forecast period, as the market
is flooded with credit cards and merchant acceptance rises. But, the spend per transaction is all set to dip
notably. To date, Indians have been known to use a credit card only for larger spends and for buying
specialised merchandise, but this is now changing. With more and more Indians using credit cards for daily
expenses, the average spend per transaction is expected to decline to Rs2,832 by 2011. The value of
transactions is expected to grow at a CAGR of 15% in constant value terms, to reach Rs877 billion in 2011.

Euromonitor International Page 2

Credit card transactions India

• The future of credit cards in India is safe, given that the e-commerce market is showing great growth
potential. The primary requirement for any transaction on the Internet is the possession of a financial card,
and credit cards form a major part of this segment. Although other modes of payment on the Internet are
rising, the traditional method has always been to use credit cards and this is going to be so going forward.

SECTOR DATA
Table 1 Credit Cards Sector Performance: 2001-2006

2001 2002 2003 2004 2005 2006

Number of transactions 26.4 38.6 55.4 79.2 109.6 149.2

(mn)
Transaction value (Rs mn) 80,299.6 116,169.5 166,292.5 236,501.0 327,583.8 446,495.2
Number of cards in 5.5 7.4 9.7 14.2 19.6 26.5
circulation (mn)
Source: Euromonitor International, Trade press

Table 2 Credit Cards Sector Performance: % Growth 2001-2006

% growth
2005/06 2001-06 CAGR 2001/06 TOTAL

Number of transactions 36.1 41.4 464.5

Transaction value 36.3 40.9 456.0
Number of cards in circulation 35.0 36.9 380.1
Source: Euromonitor International, Trade press

Table 3 Personal Credit Cards Sector Performance: 2001-2006

2001 2002 2003 2004 2005 2006

Number of transactions 25.3 36.9 53.0 75.7 104.3 141.3

(mn)
Transaction value (Rs mn) 71,436.5 104,264.5 149,300.0 211,655.0 291,234.3 392,947.1
Source: Euromonitor International, Trade press

Table 4 Personal Credit Cards Sector Performance: % Growth 2001-2006

% growth
2005/06 2001-06 CAGR 2001/06 TOTAL

Number of transactions 35.4 41.1 459.6

Transaction value 34.9 40.6 450.1
Source: Euromonitor International, Trade press

Table 5 Corporate Credit Cards: Sector Performance: 2001-2006

2001 2002 2003 2004 2005 2006

Number of transactions 1.2 1.7 2.4 3.6 5.3 7.9

(mn)
Transaction value (Rs mn) 8,863.0 11,905.0 16,992.5 24,846.0 36,349.6 53,548.1
Source: Euromonitor International, Trade press

Euromonitor International Page 3

Credit card transactions India

Table 6 Corporate Credit Cards: Sector Performance: % Growth 2001-2006

% growth
2005/06 2001-06 CAGR 2001/06 TOTAL

Number of transactions 49.9 46.2 568.6

Transaction value 47.3 43.3 504.2
Source: Euromonitor International, Trade press

Table 7 Credit Cards: Number of Cards by Issuer 2001-2005

'000 Cards
Company 2001 2002 2003 2004 2005

ICICI Bank Ltd 455.7 1,066.8 2,052.9 3,668.8 5,075.4

Citibank India 1,458.1 1,648.6 2,052.9 2,623.2 3,213.7
Standard Chartered Bank 1,275.9 1,328.6 1,353.0 1,788.5 2,400.5
India
SBI Cards & Payment 741.6 1,097.2 1,097.5 1,408.0 2,106.6
Services Ltd
HDFC Bank Ltd - 140.4 447.5 1,035.3 1,469.7
HSBC India 535.9 630.4 699.8 917.2 1,234.5
American Express Co 321.7 465.5 559.9 715.4 979.8
ABN AMRO Bank NV - 109.7 337.7 579.8 960.2
Canara Bank 72.5 93.9 88.7 248.5 431.1
Bank of India 139.3 121.1 168.9 186.4 323.3
Bank of Baroda 123.6 158.0 168.9 215.3 284.1
Others 385.8 539.8 672.6 813.8 1,117.0
Total 5,510.0 7,400.0 9,700.0 14,200.0 19,596.0
Source: Euromonitor International, Trade press

Table 8 Credit Cards: Number of cards by Operator 2001-2005

'000 Cards
Company 2001 2002 2003 2004 2005

Visa International 2,881.7 3,907.2 5,189.5 7,668.0 10,797.4

Service Association
MasterCard 2,325.2 3,063.6 3,909.1 5,637.4 7,544.5
International Inc
American Express Co 165.3 229.4 320.1 482.8 666.3
Citibank India 137.8 199.8 281.3 411.8 587.9
Total 5,510.0 7,400.0 9,700.0 14,200.0 19,596.0
Source: Euromonitor International, Trade press

Table 9 Credit Cards Transactions by Acquirer 2001-2005

million transactions
Company 2001 2002 2003 2004 2005

HDFC Bank Ltd - 3.0 8.2 14.8 24.9

Citibank India 10.6 12.1 14.2 17.1 19.9
ICICI Bank Ltd - 1.9 4.4 11.3 19.5
Bank of Baroda 6.6 8.1 11.0 14.1 16.7
IDBI Bank Ltd - 1.1 2.7 5.1 7.9
UTI Bank 2.1 3.1 4.1 5.8 7.8
Bank of India 1.6 2.3 3.0 4.3 5.8
Others 5.6 7.0 7.9 6.7 7.2

Euromonitor International Page 4

Credit card transactions India

Total 26.4 38.6 55.4 79.2 109.6

Source: Euromonitor International, Trade press

Table 10 Credit Cards Transaction Value by Operator 2001-2005

Rs million
Company 2001 2002 2003 2004 2005

Visa International 41,226.7 59,158.1 83,425.5 116,998.1 160,338.7

Service Association
MasterCard 30,693.8 43,787.3 61,866.9 87,095.9 119,605.8
International Inc
American Express Co 4,591.1 6,933.7 11,333.3 17,933.6 26,494.9
Citibank India 3,788.1 6,290.4 9,666.8 14,473.5 21,144.5
Others - 0.0 - - -
Total 80,299.6 116,169.5 166,292.5 236,501.0 327,583.8
Source: Euromonitor International, Trade press

Table 11 Personal Credit Cards Transactions by Acquirer 2001-2005

million transactions
Company 2001 2002 2003 2004 2005

HDFC Bank Ltd - 3.0 8.0 14.4 24.0

ICICI Bank Ltd - 1.8 4.2 11.0 18.8
Citibank India 10.1 11.4 13.3 15.9 18.2
Bank of Baroda 6.3 7.7 10.6 13.6 16.2
UTI Bank 2.0 3.0 4.0 5.7 7.5
IDBI Bank Ltd - 1.1 2.7 4.9 7.5
Bank of India 1.5 2.2 2.9 4.2 5.7
Others 5.3 6.6 7.4 6.1 6.4
Total 25.3 36.9 53.0 75.7 104.3
Source: Euromonitor International, Trade press

Table 12 Personal Credit Cards Transaction Value by Operator 2001-2005

Rs million
Company 2001 2002 2003 2004 2005

Visa International 37,504.2 54,217.5 76,441.6 106,885.8 145,617.1

Service Association
MasterCard 27,503.1 39,620.5 55,987.5 78,524.0 107,174.2
International Inc
American Express Co 3,571.8 5,421.8 9,107.3 14,604.2 21,551.3
Citibank India 2,857.5 5,004.7 7,763.6 11,641.0 16,891.6
Total 71,436.5 104,264.5 149,300.0 211,655.0 291,234.3
Source: Euromonitor International, Trade press

Table 13 Corporate Credit Cards Transactions by Acquirer 2001-2005

million transactions
Company 2001 2002 2003 2004 2005

Citibank India 0.5 0.7 0.9 1.2 1.7

HDFC Bank Ltd - 0.1 0.2 0.5 0.9
ICICI Bank Ltd - 0.1 0.2 0.4 0.7
Bank of Baroda 0.3 0.3 0.4 0.4 0.5
IDBI Bank Ltd - 0.0 0.1 0.2 0.3

Euromonitor International Page 5

Credit card transactions India

UTI Bank 0.1 0.1 0.1 0.2 0.2

Bank of India 0.0 0.1 0.1 0.1 0.1
Others 0.3 0.4 0.4 0.6 0.8
Total 1.2 1.7 2.4 3.6 5.3
Source: Euromonitor International, Trade press

Table 14 Corporate Credit Cards Transaction Value by Operator 2001-2005

Rs million
Company 2001 2002 2003 2004 2005

Visa International 3,722.5 4,940.6 6,983.9 10,112.3 14,721.6

Service Association
MasterCard 3,190.7 4,166.8 5,879.4 8,571.9 12,431.5
International Inc
American Express Co 1,019.2 1,511.9 2,226.0 3,329.4 4,943.5
Citibank India 930.6 1,285.7 1,903.2 2,832.4 4,252.9
Others - - - - 0.0
Total 8,863.0 11,905.0 16,992.5 24,846.0 36,349.6
Source: Euromonitor International, Trade press

Table 15 Credit Cards: Forecast Sector Performance: 2006-2011

2006 2007 2008 2009 2010 2011

Number of transactions 149.2 194.1 234.4 257.7 284.4 309.8

(mn)
Transaction value (Rs mn) 446,495.2 584,918.1 694,089.3 782,064.4 837,409.7 877,497.6
Number of cards in 26.5 32.4 36.9 41.6 45.7 49.8
circulation (mn)
Source: Euromonitor International, Trade press

Table 16 Credit Cards: Forecast Sector Performance: % Growth 2006-2011

% growth
2006-11 CAGR 2006/11 TOTAL

Number of transactions 15.7 107.7

Transaction value 14.5 96.5
Number of cards in circulation 13.5 88.4
Source: Euromonitor International, Trade press

Table 17 Personal Credit Cards: Forecast Sector Performance: 2006-2011

2006 2007 2008 2009 2010 2011

Number of transactions 141.3 182.1 217.3 235.1 259.0 282.4

(mn)
Transaction value (Rs mn) 392,947.1 504,978.6 582,153.9 634,547.7 672,620.6 699,525.4
Source: Euromonitor International, Trade press

Table 18 Personal Credit Cards: Forecast Sector Performance: % Growth 2006-2011

% growth
2006-11 CAGR 2006/11 TOTAL

Euromonitor International Page 6

Credit card transactions India

Number of transactions 14.9 99.8

Transaction value 12.2 78.0
Source: Euromonitor International, Trade press

Table 19 Corporate Credit Cards: Forecast Sector Performance: 2006-2011

2006 2007 2008 2009 2010 2011

Number of transactions 7.9 12.0 17.0 22.7 25.5 27.5

(mn)
Transaction value (Rs mn) 53,548.1 79,939.5 111,935.4 147,516.7 164,789.1 177,972.2
Source: Euromonitor International, Trade press

Table 20 Corporate Credit Cards: Forecast Sector Performance: % Growth 2006-2011

% growth
2006-11 CAGR 2006/11 TOTAL

Number of transactions 28.3 248.2

Transaction value 27.2 232.4
Source: Euromonitor International, Trade press

Euromonitor International Page 7