Indians’ spending on international credit cards has increased more than that on prepaid payment instruments (PPIs) and debit cards over the past two years. This increase can be attributed to a surge in travel following the lifting of COVID-19 travel restrictions as well as attractive reward points offered by card issuers, according to a report by the Economic times.
The growth comes despite the government’s decision to include international credit card transactions under the liberalised remittance scheme, which imposes a higher tax collected at source (TCS) rate of 20 per cent on such transactions. The credit card sector still faces challenges in implementing these regulations, the report said.
According to data from the Reserve Bank of India (RBI), international spending on credit cards increased by 63 per cent between December 2022 and July 2024. Spending through PPI grew by 53 per cent, while overseas debit card transactions saw an increase of just 8 per cent, ET reported.
Ananth Babu, head of cards and payments at CSB Bank, told the paper that banks are promoting credit cards because interchange revenues from international transactions are higher with dynamic currency conversion (DCC) and exchange margin rates. “This is around 3-5 per cent of the transaction and such high margins are not available for debit cards. From a customer perspective, credit cards are more preferred just because of the kind of rewards that come with them.”
Despite higher fees for international transactions, customers prefer credit cards for their convenience and benefits. Sanjeev Moghe, Head – Cards & Payments, Axis Bank, said, “Credit cards can be used anywhere and customers just need to activate their card for international use. It is like roaming on our telephone networks.”
While transactions through PPIs have increased since December 2022, the industry expects this growth to slow due to the limited applications of such instruments.
The international expansion of the Unified Payments Interface (UPI) is expected to capture a larger market share as new corridors are established. It is also expected to offer more competitive fees thanks to the oversight of the National Payments Corporation of India, the report said.
First published: August 27, 2024 | 14:22 IS
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