Credit card a major source in financing consumer purchase

To expand the coverage of credit cards and reach out to rural people, South Bangla Agriculture and Commerce Bank is going to offer the services through the Agent Banking platform very soon. Mohammad Shafiul Azam, Vice President and Head of Cards revealed this to The Business Post’s Mubtasim Fuad in an interview. Here are the excerpts

The Business Post: What is the present status of the credit card business in Bangladesh?

Mohammad Shafiul Azam: Nowadays credit cards have become a major source in financing the consumer purchase and a method of money transmission. The credit card serves two distinct functions for consumers. It is a means of payment and a source of credit.

The popularity of credit cards as a payment mode has been attributed to the convenience of not carrying cash and also providing consumers with a secure, reliable and convenient means of payment.

Because of the many convenient features of credit card usage, it has become a profitable product for many banks in Bangladesh.

Banks that are offering credit card services at present, therefore, are aggressively devising strategies to increase their customers and thereby capture increased market share. Others are preparing to enter the market with a target of earning profit and establish a footprint in the market.

During the ongoing pandemic situation, digital and cashless transactions have become very popular in Bangladesh.

As credit cards are the most trusted and convenient method of digital transaction, the use of credit cards is also increasing day by day. As per the Bangladesh Bank source as of August 2021, there are 17, 86,685 credit card users in Bangladesh. However, banks have taken an aggressive initiative to expand their credit card operations rapidly and thereby increase the number of their cardholders and market share.

TBP: Per capita income of people increased. Do you think the use of credit cards is increasing in line with people’s income?

Mohammad Shafiul Azam: No, not increasing compared to the increase of per capita income. We have to think first about how many people are still out of credit card facilities.

If we consider that a taxpayer can avail of a credit card, there is a potentiality to issue at least 44 lakh credit cards in the market. As per NBR data, approximately 20-22 lakh people are paying tax now and at least 2 credit cards can be issued per person. It indicates 60 per cent of people having financial solvency are still not using a credit card facilities.

I think the use of credit cards is not related to per capita income, it is related to people’s lifestyle, social status and acceptability and availability of credit cards at the merchant outlets.

As per BB data, there is only 83,500 Point of Sale (POS) terminals installed by all the banks in the market. If we consider a minimum of two POS terminals installed in a shop, the number of POS merchants would be 41,750. I think if we cannot increase the number of POS merchants, the use of credit cards will not be increased.

TBP: Tell us about card users’ patterns.

Mohammad Shafiul Azam: Mostly service holders above Tk 30,000 salary range, medium to upper-level businessmen, self-employed professionals, doctors and engineers are the targeted segment of credit card customers. If we consider the credit card user pattern, the urban-rural ratio is 98:2.

TBP: Covid-19 impacted people’s income and restricted movement. How was your business hit by the pandemic?

Mohammad Shafiul Azam: We have faced and are still facing the negative impact of the credit card business.

During the lockdown period, the number of credit card transactions dropped badly (in April 2021 it was Tk 523 crore per month, whereas the usual monthly transaction is Tk 1,500 crore). Due to repeated lockdown and limited banking hours, the repayment of credit cards also decreased, as a result, the abuse of credit cards increased remarkably.

TBP: What challenges the sector is facing?

Mohammad Shafiul Azam: As stated above most of the POS merchants are located in urban areas like Dhaka, Chattogram, Sylhet, Rajshahi and Khulna. Most of the banks are doing business within these metropolitan cities. As a result, competition among the banks is very high, and in most cases, we are facing high DBR (Debt Burden Ratio) during the issuance of new credit cards to the customers. Sometimes due to the over financing in the issuance of credit cards the irregularities of repayments are increasing day by day.

As the credit is an unsecured product (loan facility without collateral), in case of default it is very difficult to recover the card dues and legal procedures are also very limited in such types of recoveries. Due to lifestyle and time demand, credit cards are very popular with young aged service holders, businessmen and entrepreneurs but due to lack of TIN (TAX Identification Number), we cannot issue credit cards to this segment of customers. As the government wants to move towards a cashless society, I think we need some waiver on such types of regulatory measures.

TBP: How do you differentiate your card from others?

Mohammad Shafiul Azam: Actually all banks credit cards have the same facilities and functionalities except services.

We do not have hidden charges. We ensure personalised services for each customer. We are monitoring customers’ transactions while they are travelling abroad to protect their card transactions from fraudulent and malicious attacks.

If you talk about the extra benefit we are providing our customers, I would say it is the Fund Transfer facility with the lowest rate in the country.

TBP: Where do you want to take the company in future with the card business?

Mohammad Shafiul Azam: To ensure the best services for our customers we are planning to implement a world-class Card Management System (CMS) with Switch, ATM controller & Payment Gateway. In addition to our branch and sub-branch network, we will expand our sales network to all major cities to explore the untapped market. We will offer credit cards to rural people through our Agent Banking platform very soon.