Bank revises cash-card TV commercial

Ta Chong Bank (大眾銀行) launched revised TV commercials for its cash-advance cards yesterday, following negative reactions to the original ads.

Ta Chong recently ran TV ads stating that "borrowing money is easy and noble." The lender's new spot adds, "If only you can repay responsibly."

While only highlighting its convenience, the bank's previous commercial met with strong criticism, arguing that the bank failed to warn consumers of the cash card's 18 percent interest rate. Critics also said the ad would influence young users to overspend, an accusation that the bank denied.

"We are targeting consumers who are over 30 years of age, who have stable incomes and who may sometimes require quick access to cash," Chen Ching-ping (陳建平), the bank's CEO said yesterday. "Young people are not our primary target group."

Ta Chong chose entertainment personality Tsao Chi-tie (曹啟泰) to promote its cash card in the controversial TV commercials.

"We chose Tsao Chi-tie ... because he is a credible borrower who paid off all his NT$160 million debts," Chen said.

As a late-comer to the banking sector, Ta Chong is upbeat about the cash card's market potential, saying it may grow "four or five fold."

For the past four years, the market's top-three players, Cosmos Bank (萬泰銀行), Taishin International Bank (台新銀行) and Union Bank (聯邦銀行), loaned a total of NT$67.8 billion to cash-card users.

Union Bank Manager Joy Tang (湯碧秋) said the domestic cash-card market may expand to NT$200 billion this year.

Shih Kung-liang (施坤良), executive vice president at Cosmos, expects the bank's NT$5.5 billion in transactions from its 1 million clients to rise 30 percent this year.

With an extra-ordinarily high interest rate, Shih said that the cash-card business hasn't generated big profits.

"The risks in short-term small loans are high since no collateral or guarantors are required from borrowers," he said.

Cosmos' cash-card business only started making money two years ago, which amounted to 30 percent of its overall revenue, Shih said.

On average, a loan of NT$30,000 to NT$50,000 is usually granted, which translates into NT$450 to NT$750 in monthly interest payments, Shih said.

"Maintaining a low non-performing-loan [NPL] ratio costs banks dearly, which should be reasonably co-shared by borrowers," Tang said.

The overall NPL ratio for the cash-card sector is no higher than 3 percent at domestic banks, he said.

To reflect costs, it's not likely that banks will lower interest rates on the loans, although some upstart banks may do so to compete for customers, but they will need to levy service or transaction fees to break even.