Krungsri Consumer banks on instalment-loans

Krungsri Consumer, the consumer-finance arm of Bank of Ayudhya and a major player in unsecured loans, will highlight instalments and revolving lending as the clear selling points for its credit cards over the remainder of the year in a bid to boost interest income.

About 70 per cent of the company’s interest income comes from personal loans, especially those provided by the Krungsri First Choice unit, while credit-card interest income is small because most card users generally use their full credit entitlement rather than make use of revolving facilities, said Thakorn Piyapan, managing director of Krungsri Consumer.

The low rate of delinquency from the relatively low use of revolving credit and payment by instalment means unsecured loans are not a key driver of high household debt, besides which the majority of spenders are people with a monthly income of Bt30,000-Bt50,000, a segment that generally exhibits financial discipline, he said.

“When conducting unsecured loan business, revolving and instalment payment is meaningful to interest income, therefore we have to increase such activity among credit-card holders by applying the Krungsri First Choice model to credit cards,” said Thakorn.

Krungsri First Choice is well known as an instalment-loan provider, its strong point being the unit’s dealer network. 

Thakorn said the image of Krungsri credit cards must be developed along the lines of Krungsri First Choice by expanding the number of dealers and offering zero interest for all instalment products.

The instalment period for credit cards is limited to 10 months, whereas it is 24 months for personal loans.

Krungsri Consumer anticipates that instalment volumes should grow to 20 per cent of total spending. Monthly instalment payments on Krungsri credit cards currently account for only 15 per cent.

The company will offer zero-interest instalment repayments for new categories such as subscriptions to CTH – which now holds the rights to live broadcasts of English Premier League football matches – insurance products and bicycles, said the MD.

The latter segment is becoming more popular, in line with bike tourism in Thailand. 

The company will also actively encourage existing revolving-credit users to maintain their activity by designing an intensive campaign and tailor-made products to match their spending behaviour and the needs of traders that such customers often visit.

The ratio of revolving to full-payment credit is currently 40:60. Krungsri Consumer wants make it 50:50 in the near future in order to boost outstanding balances, he added.

Krungsri Consumer’s overall portfolio currently stands at Bt105 billion, of which Bt58 billion is personal loans.

Meanwhile, the company has sent Krungsri First Choice staff to help establish the strategy and platform at Krungsri Financial Service, a joint venture in Laos in which Bank of Ayudhya holds 70 per cent.

The bank is awaiting approval from the Bank of Thailand before submitting a licence application to the Lao authorities. The JV is expected to start operation by the end of the year, he said, adding that personal and auto loans will be provided through the new business.