Indians still wary of plastic payments, finds survey

Plastic card issuers have been making tall claims about their fast growth and how they have reached millions of Indians in a short span, but all these data may now have to be taken with a pinch of salt.

A MasterCard survey, executed by an independent financial services consultancy Edgar, Dunn & Co (EDC), says more than 50 banks that participated have a high level of inactive cards in their portfolio.

The survey — India Cards Council (ICC) Benchmarking Study — says India has about 56% active cards against 80% active cards in Australia and 75% in Singapore.

As per Reserve Bank of India data, there are about 2.55 crore credit cards in India and 12.5 crore debit cards.

The first-ever India-specific study by MasterCard, which was released on Thursday, included all forms of payment cards — credit, debit and prepaid cards.

Lance S Blockley, managing director of EDC, says, “The number of inactive cards is high in fee-free markets (where cards are issued without any annual fee). Usually, the inactive credit cards need to be made active by stimulating buying or should be cancelled. Issues may come to bite you later if you don’t take steps today.”

Explaining why one of the two measures was essential, Blockey cities the example of Taiwan, where any individual owned seven to nine cards till a few years back as these cards came for free.

When the credit scenario turned adverse, all the inactive cards suddenly kicked into activity and banks had a difficult time trying to manage the situation.

“India currently has about one card per person on an average,” Blockley says. 
However, Blockley agrees that “it is very difficult to bring fee-based cards once you have a fee-free card market unless you bring in value proposition. If one player introduces fee, customers will switch to others, who do not have a fee for cards. Huge fee is paid in other countries because the benefit package is high.”