China’s credit card industry recorded its first pretax profit of $251 million in 2010, and profits could reach $1.8 billion by the end of 2015, emphasizing China’s potential for future card-market growth, new research suggests.
Chinese issuers’ combined profit last year was relatively small at just $1 per card, which compares with about $100 per card Australia or New Zealand, Andrew Neeson, Lafferty Group head of world cards intelligence, tells PaymentsSource. The world cards unit of London-based consultancy Lafferty Ltd. conducted the research.
Though it may have a ways to go, China’s credit card market “could come into a really serious profit within the next few years and may transform into probably the most profitable market in the world,” Neeson surmises.
Chinese officials historically have discouraged consumers from borrowing, which has slowed the country’s credit card market growth, according to Lafferty. Many Chinese consumers view credit cards as cash advances instead of as loans, with more than four-fifths of the country’s cardholders paying of their balances each month, the company says.
As such, issuers increasingly are encouraging consumers to rollover their balances, which would help the institutions to generate interest income, Neeson adds.
And credit cards have become a larger part of Chinese culture over the past few years, he says.
More younger Chinese consumers are using credit cards on a regular basis because more merchants are accepting them for payment. “If consumers have a credit card in their pocket and see that a merchant accepts it, they may be more inclined to use it.” Neeson says. More than 2.2 million merchants accept credit cards in China, he adds.
Billed credit card volume last year grew to $748 billion from $4.8 billion in 2002, Neeson says. In 2010, credit and debit cards accounted for 35% of retail sales, with credit card use representing about 45% of the combined card sales, he says.
As acceptance continues to increase, so, too, has card issuance as issuers have worked to promote credit cards, especially those tied to rewards programs. Last year, financial institutions issued 229.6 million credit cards, up from 15.6 million in 2002 (see chart), Neeson says.
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