Credit card users set to rise 20% as banks ease procedures
Credit card users set to rise 20% as banks ease procedures
The Jakarta Post, Jakarta
For Turmini, a staff member at the finance ministry, having more
than one credit card is no longer a luxury nowadays, it is a
necessity, and many people seem to share her sentiments.
With the market is still largely untapped, credit card issuers
-- mostly banks and hypermarkets -- are now seemingly racing to
net ordinary workers like Turmini to apply for "plastic money",
by providing incentives such as lower minimum income
requirements, as well as easing the application procedures.
Turmini would only need to provide an identity card for her
credit card application to be processed.
Due to the easier procedures in applying for a credit card
amid robust growth in consumer spending and an expected
improvement in income, the number of credit card users may
increase by 20 percent this year.
"We have estimated that credit card issuances will likely grow
by 20 percent this year. Based on our latest report, there were
about 7.5 million users last year," said Country Manager for Visa
International (Asia Pacific) Ltd. Ellyana C. Fuad recently.
Ellyana said the market for the expansion of credit card users
remained huge as there were at least 15 million potential users
that remained untapped. Indonesia, Southeast Asia's largest
economy, has a population of about 220 million people.
According to the Indonesian Association of Credit Card
Issuers, credit cards are currently used for 10 million to 12
million transactions a year, worth as much as Rp 30 trillion
(US$3.3 billion).
In terms of spending, Citibank has estimated that the industry
will grow by between 5 percent and 10 percent.
The economy is projected to grow by at least 5.4 percent this
year from an estimated 5 percent last year, with domestic
consumption one of the key drivers of the economy, contributing
about 70 percent of gross domestic product (GDP).
Due to strong consumer spending, the credit card business has
become a gold mine for issuing banks in Indonesia, with the
number of cardholders rapidly rising each year. There are
currently about 16 local and international banks here that take
part in the business.
Bank Mandiri president director E.C.W. Neloe said that to tap
the large market in the credit card business, banks were now
racing to provide easier application procedures for new users and
offering new value-added facilities with their cards.
"Credit cards, as part of the consumer business, are a
lucrative industry. We are now trying to simplify the application
procedures to get more users, but at the same time increasing the
supervision of the users to avoid bad debts," he said.
Neloe said many banks were now focusing their marketing
efforts on the card business, from advertising and promotions to
gifts and low interest rates on payments, as well as enhancing
the physical appearance of the cards.
U.S.-based Citibank is the largest issuer of credit cards in
Indonesia, with a 35 percent market share. In terms of spending,
the bank's cards account for about 50 percent of the total value
of all credit card transactions here.
Currently, many of the world's more famous brands in the
industry are available in Indonesia, such as Visa, Mastercard,
and American Express.
Visa is currently the market leader in credit cards in
Indonesia with about 70 percent of the market share.
However, despite the positive prospects in the industry,
Ellyana warned that the growth in the number of credit card users
could cause bad loan problems for issuing banks in the future --
especially as more and more people are now seemingly unsatisfied
by having one credit card despite their limited incomes.
The role of the central bank as the regulator, in terms of
tightening the supervisory mechanism and providing clear-cut
regulations for the industry, will be the key for credit card
development, Ellyana said.
"This is important to help develop the market and increase
transactions without causing harm to both the credit card holders
and the banks."