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The pandemic has pushed us to change in many ways. Spending needs and habits of affluent consumers and millennials changed too, forming behavioural patterns that make for current and potential future trends. While some spending changes are unsurprising, others are much needed to boost the financial ecosystem. We caught up with Kunal Shah, founder of CRED, a members-only app that rewards the user with exclusive benefits for paying credit card bills, to take a deeper look at metro spending during the pandemic.

Kunal Shah
Kunal Shah, founder, CRED

A recent consumer study by CRED found that the current generation is changing attitudes towards spending and credit cards, as a consequence of rising disposable incomes, exposure to technology, and the opportunity to travel and explore the world. “With choice becoming abundant and access convenient, aspirational value has shot through the roof. Confidence in the safety and ease of credit cards alongside the rise in e-commerce, has put India in the direction of growing consumer credit (as a percentage of GDP),” says Shah.

Traditionally, spending habits of Indians have revolved around family expenditures, sticking mostly to essentials. But the emerging consumer mindset craves unique experiences, pay-per-use, and pay-as-you-go models. When viewed through this lens, ownership is largely an outdated concept and everything is a service, rather than a product.

Now bring the pandemic into the mix and priorities shift. Which is exactly what has happened over the past six months in the country. Shah says millennials spent differently during the pandemic.

How millennials spent during the pandemic —

As the going got tough, the affluent went digital

One of the most significant spending trends witnessed among affluent consumers was their shift to online. Consumers shifted to virtual means of spending since physical avenues were limited. “E-commerce witnessed a massive boost during the lockdown and this trend has continued post the lockdown as consumers have become habituated to the convenience, safety, and quality of online shopping and delivery. Seems like this trend is here to stay. Even for basics such as groceries, consumers have turned to online platforms and are staying with them” adds Shah.

spending online

While people could not head to malls or theatres, they found alternate sources of entertainment consuming content online through digital subscriptions to OTT or educational platforms.

The shift to digital has been witnessed for both discretionary and non-discretionary spends and as a digitally-native generation grows, there will be greater acceptance of all things digital. This trend was reaffirmed by spending preferences of CRED members during and post lockdown across Delhi, Mumbai, and Bengaluru. “Credit card spends on digital subscriptions of CRED members saw a rise of 101% while e-commerce witnessed 80% spends as compared to the pre-lockdown period. Even post-lockdown, digital subscriptions were in demand at 86%, and e-commerce was massively adopted with a rise of 130% in comparison to the pre-lockdown period,” Shah adds.

Health first

Being locked down at home and having ample time meant people shifted their focus back to health. Eating better, working out more, and on ensuring their safety net is in place is something millennials aspired for. Health Insurance spends have also gone up in spite of being a highly under-penetrated market in India (3-4% of GDP vs 6% in the developed world). “The spending habits of CRED members reiterate the growing prioritisation of safety with insurance spends on their credit cards at a steady 94%,” Shah quotes a CRED study.

Health Insurance

Because dining out and ordering in had taken a backseat, food habits evolved as well. Consumers focused on home-cooked wholesome meals and experimenting with innovative techniques. Even though the lockdown has been lifted, rising cases of the coronavirus and safety concerns may mean this trend continues for some time. Reaffirming this, online grocery shopping was deemed safer and convenient rather than shopping from the local grocery store.

Contactless payments

Safety concerns have also made contactless payments the preferred mode of transactions. Credit card spends on wallet top-ups increased manifold, which has continued even after the lockdown. Online grocery shopping is sustaining an increase of 119% even after lockdown.

While the shift to digital is inevitable, the pandemic has accelerated its adoption with concerns over safety driving consumers to try it and convenience, quality as well as a plethora of options making them embrace it.

cashless payments at grocery

“Now, brands and companies need to devise newer methodologies and models. This should enable digital engagement with their target audiences. The COVID-19 pandemic could well have reaffirmed a digital evolution. We will look back on this as the turning point in the future,” quips Shah.

All images: Courtesy Getty

Anam Naqvi

Anam is an astute writer who aims to demystify personal finance and wealth management for the common man. She has written on geopolitics, economics and politics as well for the Economist Intelligence Unit before moving to personal finance content strategy. Her penchant for storytelling and conversation has resulted in a podcast about human stories.