Credit Cards Demands Shows Economic Recovery From COVID-19

Credit card inquiry volumes have recovered fully from the trough seen in April 2020, and in October 2020 were at 106% of October 2019 levels, suggesting that consumer economic activity has materially improved since the easing of COVID-19 lockdown measures.

Data show that credit card popularity in traditionally cash driven, non-metro locations has risen with more consumers seeking this product. October 2020 inquiry volumes in non-metro locations increased by 23% YoY compared to a decline of -10% YoY for metro locations.

Credit card origination volumes have also started picking up gradually as demand has resumed. Credit card origination volumes for July 2020 were at 37% of July 2019 levels. This decline is not as sharp as the one seen in the lockdown period of April 2020, where origination volumes slipped to 9% of April 2019 levels.

Table 1: Resumption in Credit Card Inquiry and Origination Volumes (as a % of same month previous year)

“It is encouraging to see credit card inquiry levels making a full recovery following an easing of lockdown measures. The acceleration and increased adoption of digital forms of payments means that the ongoing festive season looks promising for the cards business,” said Abhay Kelkar, vice president of research and consulting for TransUnion CIBIL.

Social distancing rules and lockdowns have forced consumers to rethink how they spend, with digital payments becoming an increasingly attractive, or even necessary, option in order to transact and make purchases in a virtual environment. In this respect, credit cards provide a significant functional advantage over cash. This shift in consumer mindset is reflected in the growth observed in outstanding balances. Credit card outstanding balances increased by 32% YoY in July 2020. This compares to a 33% YoY increase in balances at the same time last year.

* Data on credit card origination and balances data is available till July 2020