Debit card usage is on the rise in India and elsewhere as people seek to relieve themselves from carrying large amounts of cash and rein in credit cards spending. Recent research by the Reserve Bank of India shows debit cards are now the most common method of payment in India, while cash withdrawals have fallen.?Credit card spending has also declined in real terms.
The month of July saw the volumes of debit card transactions not just exceed those using credit cards, but achieve a gap of a more than a million rupees.
MIDDLE EAST DEBIT CARD OBSESSION
Like all over the world, debit cards continue to gain popularity. Where people are getting frugal with their finances due to past experiences of 2008-09 global recession and have started spending more of their money through debit cards rather than paying interest on every payment they make via credit card.
According to Emirates 24|7, card payment service providers such as MasterCard and Visa, along with the banks in the UAE have noted the new economic trend.
Dr. Alexander von Pock, Manager of Financial Services, AT Kearney Middle East said in terms of the growth of the transactions value, debit cards have really outgrown in the UAE by a large margin.
According to Master and Visa’s monthly review that ended March 31, 2011, both companies have confirmed payments via debit cards in the UAE grew more then 8% as compared to last year while other GCC countries confirmed 19.4 per cent rise in the usage of debit card.
Mr. Eyad Al- Kourdi, Country Manager & Vice President , Oman, Qatar and UAE, Southern Gulf, MasterCard explained: “At the moment, debit cards are working as payment cards that combine together all the uses of an ATM card, for example instant access to banking transactions and cash, with the added convenience of shopping at millions of merchant locations worldwide.”
While expanding debit card usage is increasing bank profitability, debit cards are also helping maintain higher average balances. They are contributing not only to higher bank revenues (increased net interest margin) but also to lower average costs (cheques and ATM withdrawals) and additional revenues (debit interchange).
If banks can assure customers to switch their mode by increasing their use of debit cards at the time/point of sale rather than using cash, they will definitely witness a direct rise in earnings through increased fees achieved by the incremental net interest income and transactions.