Stagnation Or Strategy? 7 In 10 New Credit Cards Issued To Existing Cardholders, Says TransUnion CIBIL

About seven in every 10 new credit cards issued in India have gone to people who already own a credit card.

The trend has emerged from discussions around TransUnion CIBIL's latest research white paper, Beyond the Swipe: A Research Whitepaper on How India Uses Card as a Credit Instrument. The white paper has noted that while India's credit card market has expanded rapidly over the past decade, many consumers are no longer entering the credit system through credit cards.

During the press conference, Bhavesh Jain, MD and CEO of TransUnion CIBIL, stated that lenders prefer borrowers with an established credit history.

"Today, lenders have moved towards credit-tested borrowers, which means borrowers who have established credit history. That is a phenomenon which we have seen not just for credit cards but also for other retail asset products."

Jain said another major shift has been towards borrowers who already have a credit card.

"The proportion of borrowers being tapped in by the lenders is borrowers who have an existing credit card in their wallet, which has also gone up significantly in the last couple of years."

He added that borrowers are also entering the credit card market later in their credit journey.

"Borrowers who have credit exposure for more than two years have gone up significantly in recent times... Credit cards are no longer the first credit product which the consumers are going after."

Existing Cardholders Account For Most New Cards

Adding to Jain's response, Rahul Kotabage, Head of Research and Consulting at TransUnion CIBIL, told Outlook Money that most newly issued credit cards have gone to borrowers who already have experience using credit cards.

"70 per cent of the card originations that have been happening in the recent past are coming from people who have already had an experience with a credit card. But the new-to-credit-card (NTCC) but essentially existing-to-credit-card (ETCC) set of borrowers... is roughly about 20 to 22 per cent of the borrowers."

Kotabage said the company has carried out a separate study, which is not part of the current white paper, on these borrowers.

"They perform equal or better sometimes, as compared to some of the existing credit card segments, which at a certain point of time actually gave a slightly higher risk."

He said these borrowers generally start with lower balances because they are still getting used to using credit cards.

"The balances that you get, the utilisation levels that you get are, of course, comparatively lower as compared to the existing credit cards segment. But the performance has now actually improved... Risk is not necessarily a concern."

Shift In Borrower Profile

The white paper has shown that only 45 per cent of new-to-credit-card consumers have been first-time borrowers, down from 71 per cent a decade ago. More borrowers have taken their first credit card after already using other credit products.

The report has also shown that the share of consumers holding three or more credit cards has increased to 22 per cent from 12 per cent over the past decade. Average outstanding balance per consumer has increased to Rs 65,000 from Rs 31,000.

India has remained an underpenetrated credit card market despite the rapid growth. Only 25 per cent of credit-active consumers have a live credit card, compared with much higher penetration in markets such as the US, Canada and the UK, according to the white paper.

The number of live credit cards has increased to 10.7 crore, while the number of cardholders has increased to 5.2 crore. Outstanding credit card balances have increased to Rs 3.1 lakh crore over the past decade.