As per the PwC India report titled, “The Indian Payments Handbook – 2024-29”, credit cards have witnessed a formidable growth in FY 2023-24 with the industry adding more than 16 million new credit cards, crossing the well-anticipated milestone of 100 million cards in force.
Discussing the future of digital payments in India, Mihir Gandhi, Partner & Payments Transformation Leader, PwC India, said, “Over the next five years, the payments industry will prioritise expanding ecosystems and exploring new use cases for existing platforms. Key growth drivers will include embedded finance, ecosystem finance, digital lending based on payment data, and offline payments. In India’s dynamic payments landscape, innovation, interoperability, higher security measures and financial inclusion are shaping the path towards a more seamless digital economy.”
With the addition of new cards, the industry has also seen 22% and 28% surge in transactional volume and value respectively. Debit cards have seen a dip in both transactions volume and value owing to the shift in preferences by cardholders. Credit cards are expected to reach 200 million by FY 2028-29. Newer feature innovations, product propositions and customer segments are expected to contribute towards this growth.
Business credit cards
About 40% of Indian MSME and SME segments comprise businesses with a turnover of less than Rs 10 lakhs, employ 1 to 100 employees and less than one-third of these businesses market and sell products online. These numbers, apart from providing the structure of the market, also provide an important insight into the business segment which tells us that these businesses are cash-strapped, require low- or interest-free credit, smooth
vetting/credit approval process and would keep security and protection from payment frauds at the helm of the overall operations.
Unlike corporates, MSMEs/SMEs must manage their financials, keeping working capital as the primary focus while making business payments. To do this, small businesses, especially managed by sole proprietors, reach for their current or personal accounts or personal credit cards strapping their personal finances for the business use, which can cause setbacks. Most importantly, the reconciliation of business expenses for payables becomes
tedious and may create reconciliation/settlement losses and personal credit cards does not provide any business related rewards which can be used to redeem for any business expenses.
Commercial cards
These can be beneficial for small businesses. With the top issuers entering this segment in the Indian market, the requirement for these cards has also increased. To mitigate the issue of working capital, commercial and business credit cards provide small businesses the freedom of providing interest-free loans for 45 to 55 days. Some business credit cards in India provide account payable and receivables tracking through partnerships with SaaS and BaaS platforms.
These platforms provide connected finance solutions for the end-to-end tracking of funds, expenditures made by employees and precise financial positions of the business. This allows micro businesses and sole proprietors to separate their personal and business expenses. The global credit card market has seen
small business credit cards grow through the recent years, providing annual percentage rate (APR) benefits, business expenditure rewards and tax
payment solutions.
Adoption of virtual cards
Post the Covid-19 pandemic, the B2B payment landscape has evolved due to an increased adoption of virtual card payments. Virtual cards offer a unique
proposition to businesses, allowing them to offer multiple or single use virtual cards based on the nature of business. Single-use virtual credit cards not
only offer a secure way of doing business wherever third-party transactions are involved but also offer simplified reconciliation. Many Indian delivery startups within grocery and food delivery businesses make use of single-use virtual prepaid cards to avoid reconciliation and transactional issues.
Businesses can integrate virtual cards into their system to simplify accounts payable, corporate travel, payments related to shows/conferences,
healthcare, insurance and fleet management. Virtual card market is expected to grow rapidly especially in the Asia-Pacific region.