top of page

Weekend Irani (Longform): The future of credit cards in India

Disclaimer: This is a broad industry article and not a commentary on any individual security. The intent here is to simplify and explain the working of a particular industry. This post is not a recommendation to buy/hold/sell any security. It is for informational purposes only. Investors should seek the advice of their independent financial advisor prior to making any investment decision based on this article or for any necessary explanation of its contents. The data used in this article is from publically available sources and I am not responsible for any discrepancy in the same.

If you'd like these posts in your Whatsapp Inbox every morning, join our list: Whatsapp

Weekend Irani's are the longer more detailed posts we write every weekend. These posts will take anywhere between 10-15 minutes to read and delve into the topic in a lot more detail than we do our daily ZappChais (3-5 minute reads). So sit back, and enjoy your luxurious weekend cuppa with GSN Invest's weekend special.

With the SBI IPO set to launch sometime in January, we thought this would be a good time to look at credit cards in India, understand their revenue model, and try to understand the drivers of growth in the space.

It would help to start by understanding how credit cards make money.

Interchange fee: There are five major players involved in any credit card ecosystem: The card user(average consumer), the issuer (HDFC, SBI, etc.), the network provider (Visa, Mastercard, Rupay, etc), the merchant (shopkeeper), and the merchant acquirer(link between merchant and network provider, also provides merchant with ancillary support services). Every time you use your credit card to pay ₹ 100, the merchant pays an interchange rate, roughly 2% to the merchant acquirer. Why would the shopkeeper agree to pay this fee? Because it effectively gives them access to a vast amount of customers who like to pay using credit cards. Of the ~2.0%, around ~1.5% goes to the issuer for taking the credit risk (i.e. possibility that the customer doesn't pay back, ~0.3% goes to the network for providing access to the network, and the rest stays with the merchant acquirer for onboarding the merchants into the network).

A small graphical representation of the same. Please pardon the shoddy design while I grow the business enough to afford a design person on the team! If you're a designer willing to do short pieces for us for a shout out and link back to your Website/Insta please do reach out at

Membership & other Fees: Cardholders often pay annual membership fees to use the card. The membership fee makes sense given the host of benefits including access to credit, access to airport lounges, and reward