Growth of Credit Cards In China

In this era of global economic meltdown, the world is looking up to the emerging markets like China and India for driving the growth forward. China's credit card industry is growing at a rapid pace and has a sizable volume as per the statistics of September 30, 2008.

As on date, there were a whopping 1.73 billion cards (both debit and credit) in the Chinese market, which is an 18.8% increase from the figures during the same period in 2007. It is estimated that by the beginning of 2009, China would emerge as the biggest market in the world in terms of numbers; though it still lags behind UK and US in volume. There is a large scope of cards in China due to increasing levels of customer acceptance and growing disposable incomes in families.

Mercator's International advisory services reports that due to the financial turmoil, consumers are turning cautious and checking their spending. People are losing their jobs, which have led to a higher rate of delinquency in the credit card industry. There is saturation in the debit card market.

It appears from whole scenario that card companies would be changing their aggressive marketing plans & may even cancel them altogether. Instead, they will try to focus on their existing customer base by with improved services as compared to the previous one.

Despite a growing market, however, it poses significant challenges for foreign credit card firms. t McKinsey’s survey of Chinese cardholders showed that certain dynamics in China's market tend to favor large domestic banks, with their extensive branch networks and ready-made customer relationships. Foreign firms face some problems arising from economic factors, such as the high percentage of unprofitable customers and a downward trend in interchange fees.

It is estimated that by 2013, China's consumer credit market would account for 14 percent of profits in the banking sector. Credit cards will be second only to mortgages as the most important consumer credit product, representing 22 percent of consumer credit profits, or about $1.6 billion.

Terry Xie, Director and chief analyst with Mercator Advisory Group's International advisory is of the view that economic recession might turn into a disguised blessing for China's card payment industry. It won't slowdown the industry in this recession period. Rather it should be considered as a chance to rethink on the industry developments, to change their pace & adjust their strategies before it goes out of everyone's reach. On the basis of recent reports from Mercator's International Advisory services, it can be said that China's card payment market has to be cautious going forward.

Growth in the market in terms of issuance of card, card acceptance, credit card purchases & transactions are discussed in that report. Major developments i.e. slow pace of market expansion, issuance standards, major developments in credit liabilities & card frauds; increasing responsibility of big four institutions; arrival of foreign banks in china such as Standard Chartered, Citibank, HSBC, East Asia in the payment card market are also discussed in the report. So it can be concluded that issuers of the cards need to take major decisions to keep their market share with the advent of foreign banks. Finally it is benefiting the customer who is getting better services at lower costs.

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