Credit card users will grow 20% next year

Credit card users will grow 20% next year

Rendi A. Witular, Jakarta

The number of credit card users here is expected to grow by at
least 20 percent next year, driven by a more robust growth in
consumer spending and an expected improvement in people's
income.

Citibank Indonesia card business director Sanjay Kao told The
Jakarta Post consumer spending would be stronger next year on the
back of higher economic growth and a stable political situation.

"For the industry as a whole, we estimate growth in terms of
new users will reach at least between 15 percent and 20 percent.
In terms of spending, we project that it will grow by at least
between 5 percent and 10 percent," said Kao recently.

According to the Indonesian Association of Credit Card
Issuers, there are currently about five million credit card users
from a potential base of about 28 million. Indonesia, Southeast
Asia's largest economy, has a population of about 220 million
people.

Kao said credit cards were currently used for 10 million to 12
million transactions a year, worth as much as Rp 30 trillion
(US$3.3 billion).

The 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.

"The Indonesian market is so huge for credit card players. Our
competitors are actually cash users, not banks. Transactions
using cash are still huge compared of those using credit cards.
That is what we are now trying to tap," said Kao.

Kao said that in the country's Rp 12 trillion travel industry,
only 4 percent of the money was derived from credit cards, with
the remaining coming from bank transfers and cash payments.

The Indonesian economy is projected to grow by 5.4 percent
next year from an estimated 4.8 percent this year, with domestic
consumption the backbone of the economy at about 70 percent of
gross domestic product.

Due to strong consumer spending, the credit card business has
become a gold mine for issuing banks in Indonesia, as each year
the number of cardholders increases. All major cards are now
available in Indonesia, including Visa, MasterCard, American
Express and JBC.

Many banks have focused 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.

Analyst Ryan Kiryanto of Bank BNI warned that the growth in
the number of credit card users could cause bad loan problems for
issuing banks, unless the central bank tightened its supervision
of the industry and provided clear-cut regulations.

"Bank Indonesia should immediately set up regulations or
guidelines for the industry to anticipate and prevent massive
default and fraud that could occur in the near future. We have to
learn from the industry's mistakes in South Korea," said Ryan.

Several South Korean card issuers are currently facing
bankruptcy lawsuits as a result of bad loans resulting from the
uncontrolled issue of credit cards.

However, Kao dismissed concerns that this type of problem
could occur in Indonesia.

"The South Korean government gave a number of incentives to
credit card users, expecting that they would spend more money,
which is needed to support the country's economic growth. None of
these things apply to Indonesia, thus we should not be worried,"
said Kao.