Cosmos Bank Taiwan (萬泰銀行) launched the nation's first cash-advance cards five years ago and turned them into a booming busi-ness. Now, says an industry veteran, it may be time for the nation's lenders to rethink strategies for expanding their personal loan business.
"Driven by cut-throat competition, several players' disregard of the game rules might end up messing up the overall market," said Joy Tang (湯碧秋), general manager of the cash card department with Union Bank of Taiwan (聯邦銀行).
Union Bank, which has issued more than 372,000 cash cards, ranks the fifth-largest of the nation's 34 cash card issuers as of June 30, according to the latest statistics released by the Financial Supervisory Commission.
The cash-card market jumped to NT$193 billion by the end of June, with Cosmos gaining a one-third share of the market by issuing 1.38 million cards.
No. 2 player Taishin International Bank (台新銀行) expects that the market will jump to NT$230 billion by the year's end.
Tang said that as more financial institutions join the market, some players have resorted to unhealthy strategies.
"Some, for example, launched credit cards at low interest rates with higher credit lines, making them similar to small loans," Tang said.
But given the high risks hidden behind cash card use, she said credit lines should be kept at around NT$20,000 or NT$30,000.
"Also, new players are tempted to lower the application thres-hold to boost sales, leading to a proliferation of cash cards in the market," she added.
Her comments were made in response to recent media reports that two banks are putting the brakes on new consumer financial business since the high growth rate expected for this year seems to have slowed down.
The Bank of Overseas Chinese (華僑銀行) ceased issuing new cash cards in April, although its more than 11,000 cardholders can still use its services, according to its spokeswoman Charlotte Tsai (蔡荷英).
Chen Sung-hsing (陳松興), general manager of Fuhwa Bank (復華銀行), said the bank is considering pulling out of the cash card market over worries of high risks and low returns.
On the other hand, leading issuer Cosmos has reportedly decided to shift its priority from luring new cardholders to facilitating debt repayments. Cosmos executives, however, were not available to confirm that decision as of press time last night.
Tang lauded this as a reasonable strategy. She said that since Cosmos has achieved a massive market scale, it's time for it to alter its marketing strategy, and focus chiefly on maintaining its original customers.
"Its priority now should be to garner the most contributions from each card it has issued, rather than looking for new customers," she said.
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