Credit Card Business set for Big Take Off in India

Credit Cards Spend in India is an evolving industry with >50mn base (~32mn unique customer base), >INR1tn loan outstanding (~1.2% of system credit) and 3% spends/GDP. Over the previous decade, while credit card spends posted ~25% CAGR, growth in the card base has lagged and remains low at ~32mn of unique customer base. Rapid proliferation of e-commerce, improving POS infrastructure and demonetisation were key inflection points for the credit card business.

Penetration of Credit Cards by CIBIL Score
CIBIL has 550 mn records (individuals plus businesses), of which the unique credit card customer base is mere 32mn — sub 6% penetration in credit cards. Moreover, of the 550mn, ~220mn are prime and prime plus (700 plus score), implying sub-6% penetration even in that category and sub-5% penetration in near prime and sub-prime segments.

Credit Card Loans to Hit Rs 3 Trillion by 2025
Borrowing on Credit Cards is increasing but on low base. This is reflected in credit card segment loan forming mere 1.2% of system credit, credit card spends as % of GDP at 3% and cards per capita at 3.5% per 100 persons. These indicate significant growth potential. While the CIBIL database itself is expanding, even assuming 10% percentage points penetration rise (in CIBIL database), a 10% growth in spends per card will potentially lead to INR 19tn of spends by FY25E. This will translate into the potential industry size of INR 3tn constituting near 3% of all loans.

Credit Card Customer Market Share in India
Though 33 players are in the fray currently, the credit card industry is concentrated top 3 players (HDFC, SBI, ICICI) account for >50% market, top 5 (Axis, Citi being another two) control >75%and the top 10 control >80% (largely foreign and private banks, PSU marginalized). Indian Private Sector Banks have leveraged the power of Information Technology and built Moat around their Card Business.

What is Indian Credit Card Market Estimate for 2025 ?
The cards business draws revenue from NII and fee income, which cumulatively constitute 25-30% of average loans. While NII is derived from revolving dues (30-40% interest) and EMI (18-25% rate), fee income is derived from transaction fees (intercharge, unregulated) which is split among card issuer (issuing bank, 60-65% of MDR), card network (Visa/Mastercard, 5-10% of MDR) and the acquiring bank (POS terminal, 30-35% of MDR). Additionally, 20-25% opex (internal external sourcing) and steady asset quality will lead to strong 4-6% RoA, which translate into profit pool of INR 100 bn plus.

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