Credit card companies curb incentives, but customers demand cards with fuel-related benefits: Study

The convenience and accessibility of using credit cards is helping spur an increase in demand in India’s Tier-II and III towns and cities, with fuel cashback credit cards seeing high demand along with travel and e-commerce credit cards that saw a higher adoption rate in 2023, according to a new report by ZET, India’s fast-growing fintech platform with the largest number of agents for financial distribution. 

With fuel expenses rising, fuel credit cards have gained popularity in Tier-II and Tier-III cities and saw the highest demand, reporting 17% YoY growth in 2023. These cards typically provide cashback, rewards points, or discounts on fuel purchases, making them attractive to a wide range of customers, including those residing in smaller cities and towns. The three most popular fuel cashback cards were BPCL SBI Credit Card, Indian Oil Kotak Credit Card, and IDFC HPCL Credit Card 

With increasing accessibility and growing aspirations for leisure among people in Tier-II and III towns, travel credit cards also gained traction in these regions. Demand for travel credit cards grew the fastest in 2023, witnessing a 27% YoY growth as their offerings like air miles, hotel discounts, or travel-related rewards, are increasingly getting popular among consumers in India’s hinterland. The increasing connectivity and infrastructure development in these cities also contributed to the rise in travel credit card usage. As more people from these regions explore travel options, such cards’ appeal is likely to continue growing. Maximum demand was for SBI IRCTC, Axis Vistara, and IDFC Vistara. 

The third most popular card among India’s Tier-2 and 3 cities was e-commerce due to increased internet penetration and improved logistics and delivery ecosystem. The demand for e-commerce cards in 2023 saw a 24% YOY rise on the back of their increased popularity due to specific benefits like rewards, cashback, or discounts on online purchases. These cards are often marketed with tie-ups with major e-commerce platforms, offering exclusive deals and incentives for online shopping. The three most popular credit cards were Tata Neu HDFC Credit Card, Swiggy HDFC Credit Card, and Axis Flipkart Credit Card. 

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Manish Shara, Co-Founder and CEO of ZET said, “In India, credit card penetration is low at just 5% of the population, but we are witnessing a rise in adoption in the last two years, and as per RBI’s estimates the number of credit card owners could rise to 10 crore by early 2024 from 7.5 crore in April 2022. This rise in adoption has been accentuated by factors like increased urbanisation, rising disposable incomes, growing aspirations, and the government’s push toward digital transactions. It is encouraging to see that India’s Tier-II and III cities are scripting a new chapter in the growth of credit cards as we drive financial inclusion in newer markets.” 

The study also suggests that there was a 19% (YoY) growth in New-To-Credit (NTC) consumers, with almost 50% of the consumers being less than 25 years of age. The most preferred cards for NTC consumers were AU Small Finance Bank Credit Card, SBI Credit Card, and Axis Bank Credit Card.