E-Comm’s free shipping of cheer to Banks

The growing trend of e-shopping, the use of online transactions, has taken a flight over a period of time and thus the increased use of credit cards for shopping brings revenue to banks in terms of interest and fee income. According to the official data released by the RBI, the average monthly credit cards spending has risen up from 12,035 crores to 15,470 crores, over a period of one year. It is a delight for banks, as they see a boom in their fee-based incomes, and all thanks to the globalised e-commerce sector in India.

Higher credit card outstanding translates into higher interest income for banks, as they charge penal interest for unpaid dues beyond the stipulated period, i.e. the credit card customers have to pay interests in form of fines, if they are unable to their pay their credit dues, before a given deadline. Thus, with increasing amount of credit card usage over e-trade payments, the chances of payment defaults by customers also increase, eventually leading to a hike in revenues of the banks.

Head of the credit card division at a private sector bank said online shopping and travel spends have led to a rise in credit cards spends. “Customers are increasingly buying tickets online, booking hotels and vacations, which has increased credit card spends,” he said. “Banks have tied up with many electronic chains and mobile companies, giving EMI (equated monthly instalment) options to customers on purchase of phones and other electronic items on credit cards. Alongside, the EMI option over the purchase of expensive gadgets, has also increased the credit card spending by a large chunk of consumers.

Therefore, as the customers across the country will keep on getting more and more variety of their desired products online, they will keep on using online payment modes, and thus income of both banks and the e-commerce firms would keep on increasing.