KBank woos credit-card spending with zero-interest promotions

"We have to enhance the spending of the upper income segment, who still have purchasing power. The zero-interest for six months at all shops in five shopping malls at least should shake their mood," Thawee Teerasoontornwong, executive vice president of KBank, said yesterday.

"The bank expects spending on premium brands during the last three months will be over Bt100 million," he said.

The economic slowdown has dampened the spending sentiments of upper income consumers. Credit-card spending in the first nine months at KBank expanded by 12-13 per cent, behind the target of 30 per cent.

This year was difficult for the credit-card business. KBank experienced the lowest growth ever due to the deterioration in the debt service ratio of cardholders pulling in a monthly income of below Bt30,000. That caused the bank to reject credit-card applications.

Those earning over Bt30,000 have become more cautious about spending

Since the zero-interest financing plan might detract from the image of luxury brands, sales clerks at those shops will tell buyers who are KBank credit card holders about the offer.

If the customers are interested in it, they can make their purchases at the shops and take the receipts to KBank’s booth located around the luxury shops.

The zero-interest plan is one highlight of three campaigns for this last quarter of the year to keep up spending momentum.

The bank expects for the whole year, its credit-card spending will grow by 12.5 per cent to Bt307 billion. To achieve that pace, spending on its credit cards in the last three months should reach Bt100 billion.

The bank has seen good signs of credit spending on residential-related items from last month to early this month. The government’s stimulus package using housing loans is showing a multiplier effect on the economy.

"If the government still has packages to spur the economy, we believe consumers will have more confidence in spending and the credit-card business will resume growth in the double digits, including our bank.

"The growth of credit-card spending next year should be 20 per cent," he said.

The bank plans to raise the zero-interest plan as part of its strategy in running its credit-card business next year. Instalment plans at KBank are a small proportion of card spending of Bt300 billion a year. Customers choosing the instalment plan are up 12 per cent from the same period last year.

Credit-card spending in Thailand did not expand much because it paralleled gross domestic product growth. The bank will have to eat into market share from other players or enhance the spending of its customers.

Income from KBank’s credit-card business is mostly transaction fees from merchants rather than interest income because 70 per cent of its customers choose to pay their monthly credit card statement in full rather than use revolving credit.