Abstract
Why buy this report
- Get insight into trends in market performance
- Pinpoint growth sectors and identify factors driving change
- Identify market and brand leaders and understand the competitive
environment
Product coverage
Consumer lending; Financial cards and payments
Executive summary
Card issuing continues to surge
Banks realise that the financial cards market will only start to realise
profits for operators when there is a sufficiently large pool of cardholders.
In order to achieve scale, banks are focusing on increasing the number of
cards in circulation as the primary task, thus the number of cards is expected
to increase rapidly over the forecast period. Promoting cards in the more
prosperous areas of China and even going door-to-door have become key means of
expanding the market, which is leading to the fight for customers becoming
more intense.
Inactive cards undermine profitability
Customers often apply for new cards merely for the attractive gifts offered,
and do not actually use the new cards frequently. When banks sell their
financial cards, they tend to focus on the gifts offered to promote uptake to
attract clients, rather than explaining in detail the advantages of bank cards
compared with cash. This has resulted in a low rate of usage of financial
cards, with a low frequency of transactions. Inactive cards still carry the
cost of operating the cards for issuer, as there is rarely a service fee for
the cardholder. Lack of card usage is also due to Chinese consumers' typically
rather conservative spending habits. This is likely to change, albeit only
gradually, which will create a better environment for the financial cards
market. The banks themselves will need to focus on trying to change consumers'
spending habits.
Banking regulators warns of risk of credit card loans
With credit card issuance by banks expanding rapidly, China' s banking
regulators have sought to draw consumers' attention to the risk of credit card
loans. It has proposed the establishment of a common customer credit document
pool to share information regarding creditworthiness. According to press
reports, the Shanghai banking regulator has advised commercial banks to pay
attention to the risk of defaulting, and has suggested that commercial banks
improve their credit card management systems. For example, when banks issue
credit, they need to take into account the fact that cardholders may get
credit from multiple sources if different banks issue them with credit cards.
Customers may thus over-stretch themselves and be unable to repay their debts,
resulting in banks facing the risk of defaults on loans.
Regional commercial banks enter financial cards market
Some regional commercial banks have merged, and in looking to extend their
businesses, are optimistic about the profitability of bank card products, and
are actively entering the financial cards market. For example, Bank of Ningbo,
after a reorganisation of local banking institutions, has targeted local
private businessmen through issuing high-end platinum credit cards.
Government encourages issuing of special bank cards for migrant workers
With rapid urbanisation in China, there will be more migrant workers across
the country. By the end of 2007, China had over 100 million migrant workers,
many of whom have problems sending a proportion of their salary home because
the rural remittance system is not well-established. As a result, they often
need to carry cash home themselves, typically at spring festival. In order to
provide a convenient means for migrant workers to send payments, the
government has encouraged banks to issue special banks cards for migrant
workers, which are also considered to be an effective way for banks to develop
rural finance. This trend will continue in the forecast period, as the number
of migrants moving to the major cities continues to rise.
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