KBank pushes credit card

Kasikornbank, the second-largest in terms of number of credit cards, has set an ambitious growth target for this segment of its business this year while consumer spending is down.

Last year, KBank issued 700,000 new credit cards, increasing the total number by 16 per cent to 3.6 million. This year, the bank hopes to issue 1 million new credit cards for a total of 4.4 million, up 22 per cent from 2014.

“We have to set an aggressive growth [target] as the credit-card market is not expected to grow much because of high household debt. With the slowdown in consumer spending, we have to grow by eating into our competitors’ market share, otherwise they will eat into ours,” said KBank executive vice president Thawee Teerasoontornwong.

The new credit cards this year will mainly go to consumers upcountry. He noted that non-banks and foreign banks that are players in the credit-card business did not have networks in provincial markets as extensive as KBank’s. 

Therefore, the upcountry market is its key focus.

Currently 30 per cent of KBank cards are held in the provinces.

The bank targets spending via its credit cards this year of Bt366 billion, up 29 per cent from last year’s Bt283 billion. In 2014, KBank credit-card spending expanded by 20 per cent from Bt236 billion in the previous year.

Because of high household debt, spending in the overall credit-card market this year is expected to grow by 10-12 per cent, lower than the normal level of around 15-16 per cent. Consequently, KBank will spend money on marketing campaigns to secure its existing customers and attract newcomers, both those who already hold other credit cards and new card users.

This year’s marketing budget is around 10 per cent higher than last year’s, Thawee said.

One of KBank’s marketing gimmicks is to offer customers a reward point for every Bt1,000 they spend. This year, that campaign will be made more attractive: For every Bt1,000 spent, cardholders will be given a chance to win an exclusive trip to a dream destination.

It is hoped that this extra incentive will not only encourage more spending by existing cardholders, it will help KBank achieve its target for new card issues, Thawee said.

However, despite its aggressive growth target, the bank will maintain its policy of keeping its customers from accumulating excessive credit-card debt, while screening out new applicants who have tight debt-servicing ratios.

Under this policy, about 60 per cent of KBank credit-card holders are in the upper-class Platinum segment – they have monthly incomes of at least Bt50,000. 

The bank encourages its customers to maintain credit discipline by offering extra reward points to those who pay their credit-card balances before the due date. 

KBank’s credit-card approval rate is 55 per cent while its rate of non-performing loans in this segment is 1.6 per cent, compared with the market average of 2.9 per cent, he said.