Beyond UPI Dominance: Why Indians Are Still Swiping Credit Cards Spending Rs 2 Trillion

India’s credit card market stayed above the Rs 2 trillion spending mark in May 2026, even as Unified Payments Interface continued to take a larger share of merchant payments. Credit card spends rose 2.6% month-on-month to Rs 2.02 trillion in May, according to an Equirus Securities report, underlining steady card usage despite faster growth in UPI merchant transactions.

The trend points to a payments market where both products are expanding, but for different consumer needs. UPI is becoming the default option for everyday merchant payments, while credit cards continue to draw higher-value transactions, especially in e-commerce. The report expects credit card spending in June 2026 to remain broadly stable in the Rs 2.0 trillion to Rs 2.1 trillion range, based on daily payment data from the Reserve Bank of India.

Credit card spending crosses Rs 2 trillion in May

Credit card spending increased to Rs 2.02 trillion in May 2026, up 6.6% from a year earlier. The month-on-month rise was stronger at 2.6%, suggesting some sequential recovery or normalisation in card usage after previous fluctuations. The overall card base also expanded during the month, showing that issuers continued to add customers despite greater regulatory focus on unsecured lending.

The number of credit cards in force rose by 1.018 million in May, taking the outstanding card base to 120.5 million. This reflects continued demand for revolving payment products, rewards-led spending and short-term credit access among urban and digitally active consumers. However, the growth in spending was slower than the growth seen in UPI person-to-merchant payments.

Merchant digital payments as a whole remained strong. The report said total digital payments to merchants rose around 21% year-on-year to Rs 11.3 trillion in May 2026. This includes UPI person-to-merchant transactions and credit card payments, two of the most closely watched segments in India’s retail payments ecosystem.

UPI P2M widens lead over credit cards

UPI person-to-merchant spending rose 25.2% year-on-year to Rs 8.7 trillion in May 2026. That pace was far higher than the 6.6% growth in credit card spending. As a result, UPI’s share of merchant digital payments increased further, reinforcing its position as the dominant mode for digital transactions at merchants.

UPI P2M accounted for 77.1% of total merchant digital payments in May, up by 286 basis points from the same period a year earlier. By contrast, credit cards contributed 17.9% of merchant digital payments, down by 235 basis points year-on-year. The shift shows that faster UPI adoption is changing the structure of India’s payments market, even though card spending remains large in absolute terms.

The change is not simply a case of one payment method replacing another. UPI is widely used across small merchants, local services, quick payments and low-ticket purchases. Credit cards remain more prominent in discretionary categories, travel, online shopping and bigger purchases, where users value credit periods, reward points, cashbacks or equated monthly instalment options.

E-commerce remains key driver for credit card usage

E-commerce continued to dominate credit card spending in May 2026. Online transactions accounted for 62.4% of total card spends during the month, almost unchanged from 62.6% in April. This stability suggests that credit cards remain deeply linked to online shopping, bill payments, travel bookings, subscriptions and app-based purchases.

The report also highlighted the difference between online and physical-store card usage. Average monthly spending per credit card stood at around Rs 10,500 for e-commerce transactions. For point-of-sale purchases, the corresponding figure was about Rs 6,300. This gap indicates that online channels continue to attract larger monthly spends per cardholder.

The average ticket size was also higher for e-commerce. The average e-commerce transaction value was about Rs 4,300 in May, compared with around Rs 2,600 for point-of-sale transactions. That difference is important for banks and card networks, as higher-ticket transactions can support stronger fee income, even if UPI dominates in transaction count and broad merchant reach.

For consumers, the pattern reflects how payment choices are becoming category-specific. A user may scan a UPI QR code for groceries, local transport or food, but use a credit card for electronics, travel, fashion or large online orders. This behaviour allows both payment systems to grow, while competing more directly in some merchant segments.

Issuer market share shows mild movement

The report said the top four credit card issuers saw a slight decline in their combined market share in May. Their share of cards in force fell by around 14 basis points month-on-month. Their share of total credit card spending declined by about 31 basis points. The movement was modest, but it suggests that competition remains active beyond the largest issuers.

India’s card market has become more selective after banks tightened some unsecured credit practices and regulators increased scrutiny of consumer credit growth. Issuers are focusing on customer quality, repayment behaviour and profitable spending categories. At the same time, co-branded cards, digital onboarding and targeted rewards continue to shape customer acquisition strategies.

The broader payments picture remains favourable for digital adoption. Merchant payments are growing across channels, supported by smartphones, QR infrastructure, online commerce and consumer comfort with digital transactions. The main change is in the mix. UPI is expanding faster and taking a larger share of merchant value, while credit cards are holding ground in higher-value and online-led categories.

June 2026 is expected to show stable credit card spending, with Equirus estimating spends at around Rs 2.0 trillion to Rs 2.1 trillion. If the range holds, it would indicate that card usage remains resilient, even as UPI’s larger merchant footprint continues to reshape how Indians pay for everyday purchases.

With inputs from ANI