Fintech question: Why is the credit card still around?
My latest credit card bill is less than ₹2,000. Even at the height of covid, my spend was never this low. I have not become poor. I have been reducing my credit card purchases ever since I discovered Paytm, which was so smooth and efficient that it felt as though finance had liberated itself from government clerks. (How wrong I was, but that later.)
Like most people, I started with small purchases and with the launch of the Unified Payments Interface (UPI), I started using the app for big online transactions. In recent times, I have used my credit card only when I was left with no practical choice, like when I was booking a hotel outside India, for which I would be fleeced 3.5% of the transaction amount and an unfair currency exchange rate. If it were not for global financial bureaucracy, I have no need for a credit card at all. I never needed the ‘credit’ part of the card. Most people don’t. And I wonder everyday why e-wallets and the UPI have not already killed credit cards. But the fact is that credit card customers and card usage continue to rise in India, and it is Paytm’s payments bank that has been dealt a grave blow by the gatekeepers of Indian finance.
In any case, as far as I am concerned, credit cards are dead. There is a newspaper in my head that is entirely dedicated to the events in my life. On its front page is the headline: ‘Credit Cards: End of an Era.’
I first saw a credit card when I was 19, when Citibank somehow gave it to a close relative who should have been the last person to hold such a card. On the day of the card’s activation, he took his wife and daughter to the market and bought utensils and innerwear. They marvelled at procuring goods without the feeling of having spent any money. The man defaulted on the very first bill and has since evaded all kinds of people whom the bank sent to collect the money. But, in that house, even today, “Citibank” is a discreet code for underwear.
I would be 28 when I would get my own card, but I would almost never use it because I was then suspicious of everything I did not need but was given to me. But eventually I accepted its convenience. Sometimes when I would forget to pay the bill, I would be charged a huge interest, which was more than what villainous moneylenders in art cinema charged. Money-lenders across the world lived in social guilt and the suspicion that all bad things that happened to them were because of curses of the indebted; but not credit card executives. The credit card, of course, was once a marvel of technology. But not anymore. Without the marvel, it is just a temptation offered by a sly money-lender.
I particularly dislike credit cards because two layers of banking middlemen take protection money on every international transaction just for having a monopoly over the gateways. They make me see the point of cryptos; and also why governments and banks would have never let them survive. I have stopped using my credit card domestically in vengeance against the companies that made 3.5% of every foreign transaction. Sometimes, it was 7%—like when a hotel used my card to block a deposit, and later when it released the money back to me, the banking system charged me 3.5% on each transaction along with a comical interpretation of exchange rates. So I deny them revenue on my home turf where I suddenly have options. I don’t think my transactions at home are entirely free, because the merchant at the point of sale does pay a fee and it is all passed on to me. Yes, for using the card my bank does give me “reward points,” which I can encash for many useless goods and some useful coupons, but the “rewards” only remind me that I am paying extra for it all in some form when I use the card. I agree that “zero-interest” equated monthly instalments (EMIs) are helpful for those who wish to buy an expensive good they may or may not need, and that a zerointerest EMI is truly zero. Even so, such schemes are funded by merchants to attract customers, which means one way or another I pay a price for the “zero-interestEMI,” even though I have no need for it.
In my toxic relationship with the credit card, a decisive moment came in December last year. I was in a restaurant and did not have my phone, so I had to use my card.
Maybe someone saw the number on it and passed it on. That evening a person used my card to make online purchases worth more than £5,000. My bank eventually resolved the issue and I got all my money back, but I was done with the credit card.
As I feel armed with good modern options, I feel sorry for Paytm, which was how many of us discovered ‘fintech.’ Paytm had seeded a bank that the Reserve Bank of India has crippled for “non-compliance.” It will affect millions of users; not in a serious financial way, but in a behavioural way because they are habituated to Paytm’s interface. One would expect RBI to give clear reasons for the harsh blow. But the problem is not clearly defined. All we have are problems cited by unnamed sources. The venerated central bank has had problems with Paytm for some time over know-your-customer processes, fake compliance and for not setting up enough safeguards against sharing data with foreign companies.
There is a general feeling that RBI has a point, but I cannot help but feel that the country’s banking bureaucracy dislikes all that can replace conventional banking. It reminds me of how much the telephony clergy despised the internet and then mobile phones when they first appeared.
The credit card has high bank fees, isn’t a tech marvel anymore and is not safe either. So why isn’t it dead?