Growth in the plastic-card segment that peaked in the mid-2000s seems to be finally over, with the number of credit cards registering a quarter-on-quarter decline of 11.4% in October-December 2013, the latest three-month period for which official data is available.
While the number of credit cards reduced from 1.5 million to 1.3 million in the second quarter of the current fiscal year, the decline in the number of debit cards was 3.9% over the same period. Reason: the market for plastic cards appears to have saturated.
“The credit-card market is by design smaller than the debit-card market,” according to Naseer Hasan, head of consumer banking at Standard Chartered Bank.
Speaking to The Express Tribune in a recent interview, Hasan said banks are not particularly keen on issuing too many credit cards given the overall credit environment in Pakistan. Moreover, he noted customers generally prefer debit cards to credit cards in the country.
The number of Standard Chartered debit cards is about 450,000, according to Hasan, while the number of credit cards is roughly 130,000.
Many analysts believe the reluctance of most Pakistanis to use credit cards actually hurts their financial interests. After all, it’s cheaper to shop and pay utility bills using someone else’s money: a debit-card transaction means one’s money leaves their account the moment the transaction takes place.
But using the bank’s money to buy stuff means they can earn interest on their money until the due date for the credit card payment.
ATMs, internet, mobile
Although the use of ATMs for transactions has not shown negative growth like plastic cards, the continuous increase in their share within the total e-banking transactions seems to have slowed down recently.
While the total number of e-banking transactions increased by over 5% in Oct-Dec, the rise in ATM-based transactions in the same quarter was 3.8%. Similarly, the rise in the amount transacted through ATMs in the latest quarter (7.5%) was also less than the overall increase in the amount transacted via e-banking channels (8.6%).
“Earlier, the branch and the ATM were the only available channels. But now the overall growth in digital channels, like the internet and mobile, is quite high. Our customer has also become more sophisticated,” Hasan said, adding that customers now go to ATMs for cash withdrawal only.
“The rest of banking, like balance inquiry and utility bills payment, is done through other, more convenient channels,” he observed.
Indeed, data shows the number of transactions carried out through internet and mobile banking channels have surged at a pace faster than the average rate of increase in overall e-banking transactions.
The number of transactions via mobile and internet in Oct-Dec went up 7.1% and 5.7%, respectively, which is higher than the cumulative rise in the number of total e-banking transactions (5%).
As an example, Hasan cites strong growth figures for its mobile banking segment. Launched in April last year, it currently has about 25,000 active users, which reflects a higher-than-usual take-up rate, he says.
Out of half a million customers of Standard Chartered, about 400,000 are registered for internet banking, he said. Out of those 400,000 customers, about 180,000 use internet banking actively, he added.
About 28% of total transactions by Standard Chartered customers took place through digital channels back in 2010. Their share in the total transactions increased to 56% in the last quarter, he said.
“Customers’ migration to digital channels shows their sophistication. No matter how innovative our products are, they wouldn’t be successful if our customers weren’t sophisticated,” he said.
Published in The Express Tribune, April 21st, 2014.