Asian Market Survey Results : Credit card penetration rates evaluated
Asian Banker Research evaluates the credit card penetration rates of five Asian economies and examines the challenges faced by the financial institutions in each of these markets.
There are varying ways of measuring `credit card penetration' of economies. Some groups define it as the total number of cards issued over the total population, while others gauge it as total card
spending over personal consumption expenditure (PCE).
The Asian Banker reviews the credit card penetration rates in five Asian markets – Hong Kong, Malaysia, Taiwan, Thailand and Singapore – tweaking it slightly to consider not only PCE, but, also, total number of cards issued by banks over the total working population, rather
than just total population. This combines both the demographic and economic dimension.
These two `scales' as a measure of credit card penetration should provide a better indication of the potential growth in volume and share for credit cards, as well as the challenges faced by the credit card issuers in the respective economies.
he six economies under study rank the same when either total working population or total population is used as a base, although there is a significant difference in absolute terms. The difference in average annual variation in relative terms from the annual mean for both
methodologies is minimal, though increasing since 2001. This trend results form the effect of a divergent expansion of the workforce in the various economies.
In the last five years, Singapore and Tha iland have experienced a significant increase in their workforce, enjoying currently, among Asia Pacific's credit card markets, the highest workforce
participation, with 62 percent and 56 percent respectively. They are reflective of a substantial proportion of female contribution in the workforce to overall population.
In contrast, Taiwan's workforce participation to overall population has only expanded about one percent in the same period. And Malaysia workforce participation hasn't changed at all, scoring the lowest of the six Asian economies at 40 percent.
Using both scales of cards issued over total workforce and card spending over PCE, Thailand and Malaysia emerge as the economies with the lowest credit card penetration rates among the five economies. Both countries credit card markets have been rapidly expanding with total cards issued rising by 28 percent in Thailand from 2001 to 2003 and by 22 percent in Malaysia for the same period.
In Thailand, if credit cards issued by banks only are taken into account, 13 percent of the working population already possessed a credit card as of the middle of this year, with a concentration in the
urban centers. When cards of non-bank issuers, which hold a share of 54 percent of cards issued in the entire credit card market, are added, Thailand has a credit card penetration of 23 percent of the working population. In the case of Malaysia, 56 percent of the working population holds a credit card issued by a bank.
Given these circumstances, low penetration rates and high growth in card numbers, Malaysia and Thailand are indeed the most dynamic markets in Southeast Asia. By contrast, Singapore and Hong Kong and Taiwan appear saturated as credit cards issued surpass the number of
people who work. At least for Singapore, though, the number of cards being issued is still growing at a steady pace.
In countries where there is a high level of cards issued vis-à-vis the total working population, but there is low level of card spending against PCE, competition is focused on co-branding and micro
segmentation of customers. This is the case in Taiwan. Here, financialinstitutions, generally, should direct their efforts to increasing card spending than issuing of cards to grow their customer base.
In the last five years until 1H12004, cards issued/workforce has grown 33 percent in Taiwan, the highest among all newly industrialized economies in Asia Pacific countries. With 77.6 million cards issued and an active card in circulation rate of 53 percent, nearly the entire workforce are credit card holders. There is still room, however, for deeper credit card penetration. The economy has a low card spending to overall consumer expenditure of about 16.5 percent while other mature markets such as Hong Kong or Australia, the figures are 22.5 percent and 23.5 percent, respectively.
South Korea and Hong Kong have high levels of credit card penetration both demographically and economically. The situation in these economies is similar to countries with medium-level penetration except that financial institutions do not only have the challenge of trying to increase average card spend, but they have to focus on retaining customers. Notably, these markets have seen a decline in the ratio of cards issued to workforce and card spend to consumer expenditure.
The above research note was written by Christian Kapfer, a contributing researcher for Asian Banker Research. He can be contacted at research3@theasianbanker.com and +65 6236-6520.
There are varying ways of measuring `credit card penetration' of economies. Some groups define it as the total number of cards issued over the total population, while others gauge it as total card
spending over personal consumption expenditure (PCE).
The Asian Banker reviews the credit card penetration rates in five Asian markets – Hong Kong, Malaysia, Taiwan, Thailand and Singapore – tweaking it slightly to consider not only PCE, but, also, total number of cards issued by banks over the total working population, rather
than just total population. This combines both the demographic and economic dimension.
These two `scales' as a measure of credit card penetration should provide a better indication of the potential growth in volume and share for credit cards, as well as the challenges faced by the credit card issuers in the respective economies.
he six economies under study rank the same when either total working population or total population is used as a base, although there is a significant difference in absolute terms. The difference in average annual variation in relative terms from the annual mean for both
methodologies is minimal, though increasing since 2001. This trend results form the effect of a divergent expansion of the workforce in the various economies.
In the last five years, Singapore and Tha iland have experienced a significant increase in their workforce, enjoying currently, among Asia Pacific's credit card markets, the highest workforce
participation, with 62 percent and 56 percent respectively. They are reflective of a substantial proportion of female contribution in the workforce to overall population.
In contrast, Taiwan's workforce participation to overall population has only expanded about one percent in the same period. And Malaysia workforce participation hasn't changed at all, scoring the lowest of the six Asian economies at 40 percent.
Using both scales of cards issued over total workforce and card spending over PCE, Thailand and Malaysia emerge as the economies with the lowest credit card penetration rates among the five economies. Both countries credit card markets have been rapidly expanding with total cards issued rising by 28 percent in Thailand from 2001 to 2003 and by 22 percent in Malaysia for the same period.
In Thailand, if credit cards issued by banks only are taken into account, 13 percent of the working population already possessed a credit card as of the middle of this year, with a concentration in the
urban centers. When cards of non-bank issuers, which hold a share of 54 percent of cards issued in the entire credit card market, are added, Thailand has a credit card penetration of 23 percent of the working population. In the case of Malaysia, 56 percent of the working population holds a credit card issued by a bank.
Given these circumstances, low penetration rates and high growth in card numbers, Malaysia and Thailand are indeed the most dynamic markets in Southeast Asia. By contrast, Singapore and Hong Kong and Taiwan appear saturated as credit cards issued surpass the number of
people who work. At least for Singapore, though, the number of cards being issued is still growing at a steady pace.
In countries where there is a high level of cards issued vis-à-vis the total working population, but there is low level of card spending against PCE, competition is focused on co-branding and micro
segmentation of customers. This is the case in Taiwan. Here, financialinstitutions, generally, should direct their efforts to increasing card spending than issuing of cards to grow their customer base.
In the last five years until 1H12004, cards issued/workforce has grown 33 percent in Taiwan, the highest among all newly industrialized economies in Asia Pacific countries. With 77.6 million cards issued and an active card in circulation rate of 53 percent, nearly the entire workforce are credit card holders. There is still room, however, for deeper credit card penetration. The economy has a low card spending to overall consumer expenditure of about 16.5 percent while other mature markets such as Hong Kong or Australia, the figures are 22.5 percent and 23.5 percent, respectively.
South Korea and Hong Kong have high levels of credit card penetration both demographically and economically. The situation in these economies is similar to countries with medium-level penetration except that financial institutions do not only have the challenge of trying to increase average card spend, but they have to focus on retaining customers. Notably, these markets have seen a decline in the ratio of cards issued to workforce and card spend to consumer expenditure.
The above research note was written by Christian Kapfer, a contributing researcher for Asian Banker Research. He can be contacted at research3@theasianbanker.com and +65 6236-6520.
posted by we_d_living @ Sunday, November 21, 2004
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