Credit Card & its Aspirational Quotient

With ever advancing innovations in UPI, thoughts have emerged from many corners that the credit card will lose its importance. The recent announcement of Credit on UPI has further aggravated this thought. However, I believe that the charm of credit cards is evolving rather than diminishing.

While credit cards have been a staple of modern financial transactions for decades, several factors are reshaping how people perceive and use them. It has an aspirational value that often represents cliquishness, convenience, and a certain level of financial success that people aspire to achieve. At times, credit card owners associate it with reverence.

Exclusivity is the hallmark of the elite. It combines scarcity, quality, customization, prestige, benefits, and experience collectively contribute to its higher perceived value. Possessing something exclusive can serve as a status symbol. Credit cards, particularly premium or exclusive ones like HDFC Bank Diners Club Black or AMEX Platinum, are often invitation-only or require a high income and credit score to qualify. Owning one of these cards can signify a certain level of financial success and exclusivity. It signals to others that the individual has the means and taste to acquire premium, hard-to-obtain items. This is evident from the fact that credit card ownership increases with the rise in urban household income. As per Mint, the average card holding in the lowest income category of up to INR 75,000/annum is merely 0.63%. Whereas, in the higher income category of INR 20 lakhs and above, the average ownership increases significantly to whooping 62%. Moreover, increasing income levels also sees ameliorating card variants. Furthermore, credit card swipes have increased by 20% from last year which signifies that customer are embracing the benefits & convenience associated with it.

Well, this perceived aspirational value is aided by a range of exclusive benefits, such as discounts, travel rewards, access to airport lounges, concierge services, insurance, and a plethora of luxury subscriptions, fostering a sense of aspiration toward a higher standard of living. These benefits tap into people's desire for a more luxurious lifestyle, which can be seen as indicators of their status.

In addition to the benefits, credit card issuers entice their premium offerings with royale colours & metallic aesthetics. These physical attributes emanate sense of sophistication and luxury. When individuals use such cards, service providers (golf sessions, airport meet & greet services) often acclaim the card to treat the cardholder with preferential treatment, reinforcing the card's status symbol.

Credit cards are adapting to remain relevant in the changing preferences of consumers. Of approximately 780 million internet users, 400 million people use digital payments in India. In addition to that, a significant volume of cash transactions leaves huge scope for expansion in India's diverse FinTech landscape. To conclude, India is a vast market where there is a room for multiple types of payment instruments to co-exist and grow.

Disclaimer: Spend responsibly, Manage efficiently.