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In India, the credit card penetration rate is relatively low compared to other markets such as the United States, the United Kingdom, and China. Consumers are inclined towards the usage of debit cards as compared to credit cards. According to a report from the Reserve Bank of India (RBI), there are 939 million debit cards in circulation compared to about 78 million credit cards, as of August 2022.
Even though credit card penetration remains relatively low, the sector is one of the most crowded with over 50 firms fighting for market share in India. Notably, the competition in the space is projected to further increase over the next three to four years, as the demand for credit cards is growing among consumers in Tier II and III cities. Furthermore, the fact that India is the second largest consumer market in the world after China, more players are expected to enter the credit card industry from the short to medium-term perspective.
To tap into the growing consumer demand for credit access, Samsung, one of the leading consumer electronics brands in the country, announced its foray into the Indian finance sector with the launch of a co-branded credit card. For instance,
Notably, Axis Bank is the fourth largest credit card issuer in India. According to the Reserve Bank of India, Axis Bank has approximately 89,00,000 credit cards in circulation as of August 2022. The top three credit card issuers in the country include HDFC Bank, ICICI Bank, and State Bank of India.
The launch of the co-branded credit card is strategic from two different points of view. First, credit card adoption is growing in India. In August 2022, credit card transactions reported an increase of 28% year on year to reach 24.5 crores. On the other hand, transaction value surged 44.5% to reach INR 1.12 trillion. With credit card popularity growing among consumers, especially in Tier II and III cities, the launch of credit cards in the Indian market can help Samsung to gain a foothold in the growing consumer finance market.
Second, the launch happens just in time to capitalize on the Indian festival shopping season. This is the period when major e-commerce platforms launch their sale to drive sales volume. Notably, millions of new smartphones are sold across the country in these sales. Samsung, being the second largest smartphone vendor in India, the launch of co-branded credit cards will offer consumers attractive deals on their smartphone purchases. Consequently, gaining more traction and adoption in the country.
Along with cashback on Samsung-related purchases, consumers will receive other benefits such as rewards for credit card spending, and access to deals from local firms, including players such as Zomato, Myntra, Urban Company, and BigBasket, among others. While Samsung is entering a crowded segment, the opportunity for growth is huge in the Indian credit card market.
In September 2022, the Reserve Bank of India also expanded the Unified Payments Interface (UPI) to link with credit cards. While initially only the RuPay credit cards can be used for UPI payments, the central bank is expected to launch the service for other credit cards, including Visa and Mastercard over the next few quarters. The launch of this service is expected to further boost the credit card penetration rate in the country over the next three to four years. Consequently, the entry of Samsung into the consumer finance space through the launch of co-branded credit card is a clear indication that the firm is looking to capitalize on the high growth opportunity in the credit card space, while also boosting the sales of its smartphones by offering lucrative discounts and cashback deals in India.
To know more and gain a deeper understanding of the prepaid card market in India, click here.
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