With rising disposable incomes in cities beyond metros, the penetration of credit cards — and consequently, credit card spending — is growing at a much faster pace than in traditional metro cities, primarily driven by e-commerce spending.
Other segments, including travel, online gaming, and online education, are also showing extensive increases, said Sushmit Nath, head of consulting and analytics, India and South Asia at Visa, in a conversation with Business Standard.
According to Visa data, the number of customers spending more than Rs 2 lakh annually using a single card grew roughly 4x in Tier-III cities, compared to just 1.4x in Tier-I cities between 2019 and 2024, suggesting a democratisation of affluence that was previously concentrated mainly in Tier-I cities.
During this period, credit card transactions saw a substantial 175 per cent increase in Tier-III cities, compared to just a 27 per cent increase in Tier-I cities.
Even spending per active card was higher in these cities compared to metro cities.
Credit cards, which have traditionally been a metropolitan phenomenon, have penetrated deeper beyond the top metro cities due to rising incomes in non-metros, growth in e-commerce, increased digital connectivity and spending, and government initiatives such as Pradhan Mantri Jan-Dhan Yojana, the Digital India programme, the Aadhaar project, the United Payments Interface (UPI), and the goods and services tax regime.
Apart from e-commerce spending, which has increased from 53 per cent in 2019 to 73 per cent in 2024, credit card customers in cities beyond the metros are now also spending in discretionary categories like apparel and travel, where the bulk of the spending occurs on aggregator platforms rather than merchant websites — a trend that mirrors the pre-pandemic behaviour of customers in Tier-I cities.
“We are seeing a rise in categories such as gaming and digital content, and over-the-top platforms, with more people engaging in activities like reading e-books. Online education has also gained significant traction, among other categories.
"Additionally, there has been an increase in spending in discretionary sectors, particularly in travel,” Nath said.
According to Visa data, spending on online gaming and digital content has grown 16x and 9x, respectively, between 2019 and 2024.
With non-metros now demonstrating impressive spending capacity and a strong appetite for credit-driven consumption, credit card issuers need to develop tailored products that cater to the needs of customers in Tier-III cities.
The customer profiles in these areas are markedly different from those in metro cities, requiring more specialised offerings.
According to Visa data, about 14 per cent of credit card customers belong to the salaried class, while 45 per cent are large and small farmers, and 28 per cent are traders.
According to Nath, there is considerable opportunity and growth that can be tapped into, and it’s crucial for issuers to focus on personalisation.
Understanding customers across different demographics and geographies is key, as they differ greatly from typical urban customers.
Moreover, data-driven decision-making is vital.
While traditional credit bureaux are important, many customers, especially in this segment, are new to credit and may not have robust credit profiles.
This is where alternative data comes into play, helping to drive smarter underwriting decisions, he said.
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