Banking on plastic to pay bills bit by bit
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Wei Na, a 25-year-old employee at a Beijing branch of the Industrial and Commercial Bank of China, is now receiving calls about credit cards from customers every day.
However, the questions they ask are different from a month earlier when banks saw a boom in payment by credit cards during Spring Festival.
Now that China's annual shopping spree is over, commercial banks have embarked on big promotional campaigns in order to maximize their profits.
They are intensifying cooperation with retailers and offering payment by installment for people who buy using plastic. China Citic Bank linked up with Dixintong, a Chinese cell phone store, to provide a credit card installment plan for people who purchase iPhones.
"One third of iPhone sales in our store were bought using credit cards, especially by younger Apple fans," said saleswoman Ren Ruihua at Dixintong.
In addition to the installment services, the banks are offering other credit card promotions. Wei said that credit card users with the Industrial and Commercial Bank of China can enjoy VIP services at airports and free pre-paid calling cards. Customers who apply for credit card accounts via its website will be offered gifts.
China Merchants Bank offers free cosmetics or discounts for credit card spending. Guangdong Development Bank provides triple points and discounts for credit card shopping.
China Merchants Bank also offers a wide range of products for its credit card customers to purchase by installment, including Nokia mobile phones, iPhones, iPads, flat screen TV sets, cameras, gold accessories, perfume and hand bags at its e-shop website, www.cmbego.com.
Taking the Canon EOS 60D camera for example, Beijing customer Wang Jun says he would have to pay an average of about 10,999 yuan ($1,667) for one at a store in Beijing, but he only needs to pay 790 yuan through a 12-month installment plan put in place by China Merchants Bank credit card at www.cmbego.com, saving 1,519 yuan.
"The China Merchants Bank's installment service is now attracting more people than a month earlier because quite a few people like me have used up their last salary by overspending during the Spring Festival," said Wang.
"In 2010, the growth of the credit card business depended mainly on the lure of gifts because keeping existing clients by offering rewards costs banks less than developing new clients," said Nie Junfeng, a credit card expert from China Citic Bank.
According to a report from Data 100 Market Research, a Beijing-based market research and consultancy company, the more competitive banks paid more attention to keeping existing credit card clients through gift offers. Smaller banks focused on increasing the number of new accounts.
After the first credit card appeared in 1979 in China via the Bank of China Guangdong provincial branch, China's demand for credit cards has surged.
The total number of credit cards issued by commercial banks in China has climbed to 210 million, up 28 percent year-on-year.
In 2010, credit card turnover in China reached 5.1 trillion yuan, a 46 percent year-on-year increase. Along with issuing more cards, consumers' credit card spending rose by 44 percent year-on-year to 2.7 trillion yuan, according to the China Banking Regulatory Commission.
"With China's continued urbanization, domestic spending on credit cards and the number of cards are expected to grow by 11 percent and 14 percent a year from 2010 to 2025," MasterCard said in a statement.
China is predicted to overtake the US as the largest market for credit cards by 2020 with about 900 million cards in circulation.
Attracted by the numbers, international payment service providers are now looking for an entry point in the Chinese market.
Last year, MasterCard signed a Memorandum of Understanding with China UnionPay, aiming to boost revenue by adding more locations in places where their cards are widely accepted. This will also help MasterCard better penetrate the Chinese market, a significant part of MasterCard's long-term growth strategy.
"MasterCard's teaming up with China UnionPay is a win-win situation," said Nie. Research indicates MasterCard and China UnionPay will become dominant players in the personal consumption market, now worth more than $455 billion
Besides MasterCard, JCB, the only international payment brand, based in Japan, announced cooperation with China Minsheng Banking Co Ltd in 2009 in order to "meet the growing needs of the market for international credit cards".
"We will learn from foreign banks' successful experience, accelerate legitimate standards for connected bank card business, unify operational procedures and connection standards, and tighten supervision to ward off risks," said Wu Xiaoling, a former deputy governor at People's Bank of China, the country's central bank.
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