China’s Zero-Interest Credit Card Conundrum

Author:

Tony Cheung

Source:

According to the recent “China Credit Card Market Outlook to 2013” report, China, with its huge population base and new-found economic superpower status, offers massive potential to the credit card industry. The total number of cards in circulation is forecast to grow a robust 25% in 2010–2011, and the gross value of domestic credit card use value grew by 69.9% in 2009 thanks to nearly 2,000,000,000 individual transactions. 27.9% of all 2009 domestic consumer goods sales were conducted using credit cards.
 
Despite a continuing stranglehold on the market by state-owned banks such as Industrial and Commercial Bank of China, China Merchants Bank and China Construction Bank, private and foreign banks are also expanding their credit card base rapidly, investing heavily and intensifying their presence and activities. The market’s potential is huge. Yet progress so far has been stalled by one simple and fundamental barrier: all of the effort has gone into acquiring the card-holders and sending them cards; virtually none has gone into building relationships with those clients to stimulate them to actually use the cards and use more of them.
 
One statistic not hitting the ‘China Credit Boom’ headlines is that card activation currently stands at around 10% only. That is an absolute nightmare to credit card issuers for whom success and failure are calculated largely as a function of cost-per-activation.
 
Despite the bullish statistics, the banks have been unable to ...
 
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