‘Credit card is a lifestyle product’

Midland Bank has heavily focused on digitisation and is issuing virtual cards to provide customers with real-time services through greater collaboration and integration with different service providers, Md Abed ur Rahman, head of cards of the bank, told The Business Post’s Ibrahim Hossain Ovi in an interview

He also talked about the challenges the banking sector is facing and the ways to overcome those.

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

Md Abed ur Rahman: The credit card industry in Bangladesh is growing organically. It witnessed a huge growth in the middle of this year but is now growing as before. It has been seeing an increasing number of users for the past few years, with e-commerce transactions growing significantly.

Outstanding loans in cards increased with the rise in non-performing loans. But with the right approach, our bank is controlling non-performing loans wisely. Due to the non-eligibility of credit cards, our valued clients are moving from credit cards to prepaid cards.

The Bangladesh Bank data shows the number of prepaid cards was 4,28,910 in January 2020, which increased to 9,54,673 in the same month of this year, registering a 122 per cent growth. This means customers are comfortable with using prepaid cards since those are hassle-free.

For example, Midland Bank is the only bank issuing prepaid cards to all segments of clients for free. In other banks, you will be charged between Tk 575 and Tk 1,575 to take a prepaid card.

Midland Bank wants to help build a cashless society and bring students as well as unbanked people under banking services. We believe these groups will become credit card customers one day. Bangladesh’s banking industry has been experiencing dramatic growth in recent years due to these groups.

TBP: Per capita income has increased in Bangladesh. Do you think the use of credit cards is increasing in line with that?

Abed: The use of credit cards stays within the same group because people’s income is increasing, but the card infrastructure is not expanding accordingly.

The number of point of sale (POS) terminals is very low compared to our neighbouring countries. Many businesses in Bangladesh operate without POS terminals. The card market is basically growing in city areas.

TBP: What type of services is Midland Bank offering to female clients?

Abed: As female clients are increasing, we are planning to introduce different types of services for them. We will focus on their needs and their preferred choices to launch new products.

TBP: Do you have any plan to launch Islamic credit cards?

Abed: Islamic banking is becoming popular day by day, and there are some wonderful Islamic banking products. We introduced Midland Bank Saalam last year.

To serve clients who wish to use Shariah-based products, we are thinking about introducing Shariah-based credit cards.

TBP: Which class of people currently uses credit cards the most in Bangladesh?

Abed: Credit cards are a lifestyle product, not a loan product. As people’s income is increasing, we have noticed dramatic changes in credit card user segments.

Covid-19 forced people to change their payment behaviour. The payment landscape saw many new users. The answer to your question would be the middle class and the upper middle class.

TBP: How did the pandemic impact the credit card business?

Abed: The pandemic cast a shadow on people’s income. They used credit cards less to cope with the Covid-19 impacts.

On the other hand, hospitality, tourism, travelling, and restaurant businesses were hit hard, which negatively impacted the card business.

TBP: What kind of challenges is the credit card business facing?

Abed: This sector is facing many challenges. One of the biggest challenges is infrastructure. The credit card growth rate is around 10 per cent annually, but POS terminals are not increasing in line with that.

The Bangladesh Bank data shows credit card use increased by 8.8 per cent this year compared to 2020. Currently, we have 75,000 POS terminals across the country, and the majority of them are in urban areas.

Another challenge is that cards are not accepted everywhere. To create a cashless society, we need a combined policy and awareness so that people will be interested more in using cards instead of cash.

Broadly speaking, we can categorise these challenges into three areas – technological, traditional, and cultural. Technological growth has impacted banks by forcing them to embrace new and modern methods of payments and not just look at plastic cards as the only way for customers to make payments. Digital payment is no longer an option; it is a mandatory inclusion in payment methods.

The traditional challenge is another cause for concern. High profitability in the credit card business has attracted many new players in the market, which is resulting in the pie becoming increasingly smaller.

One of the benefits of replacing cash with credit cards is to make a customer’s wallet thinner. But with so many competitors, wallets have become fatter as people now carry a deck of credit cards with them.

One of the biggest challenges that we face now is to get a bigger and better share of our customers’ wallets. With no point of difference between credit cards issued by different banks, it is difficult to influence customers’ decision.

Cultural changes in the form of customers losing trust in financial institutions are also taking customers away. The recent financial crisis and numerous frauds involving banks have earned most banks a negative image. This has dented the trust our customers had in financial institutions.

TBP: Why would a customer use Midland Bank cards? What are the extra benefits of your cards compared to others?

Abed: Midland Bank has introduced some unique features that are really awesome for our customers. Our credit cards have some valuable features that offer our clients a wide range of benefits.

With the right Midland Bank credit card, you can avail benefits during online shopping, travel, fuel purchase, dining, and more. We have included the most important features in our credit cards considering the users.

We have introduced secure credit cards with a 14 per cent interest rate, the lowest in Bangladesh. You just need to put Tk 12,000 in a fixed deposit receipt, and your card will have 80 per cent limit along with the same facilities as regular credit cards. The online fund transfer processing fee through our bank is now the lowest.

We are offering annual fee waiver facilities for making 15 transactions of any amount, and there are no other sub-conditions. You can deposit money in the mobile financial services free of charge and get reward points as well as equated monthly instalment facilities.

TBP: What is your future plan to expand the customer base?

Abed: We are heavily focused on digital banking. Issuing virtual cards is in the works. Collaboration and integration are one of our priorities for better customer service.

We have already introduced e-KYC. You can open an account on our website or the app. We are considering allowing clients to apply for prepaid cards through e-KYC. In that case, they will receive cards without visiting a branch physically.

We need to create more awareness of using credit cards as there are allegations of hidden fees, which is not true. If anyone wants to use a card to pay instalments, he should go for a loan, not a credit card.

It is said that even if there is a 0.1 paisa due, banks still charge late payment fees. Many banks already took steps to remedy the situation. We are waving such fees if the due amount is below Tk 10.