Cosmos Bank Taiwan (萬泰銀行), the nation's largest issuer of cash-advance cards, has taken a cautious approach to increasing the volume of its major profit-making product and is turning its attention to developing other niche businesses.
"We cannot rely solely on `George and Mary' cash cards for profits," Cosmos Bank president Hu Chien-chu (胡建助) said yesterday while introducing platinum credit cards co-branded with China Airlines (華航), the nation's largest carrier.
"Also, as the Financial Supervisory Commission has promulgated stricter regulations to govern the prevalent consumer banking products, we are turning to focus on quality control this year," he added.
Financial regulators will order banks to stop issuing new cards if the bank's non-performing loan (NPL) ratio exceeds 8 percent.
As of the end of July, Cosmos had issued 1.38 million cash cards, snatching a whopping 24.7 percent market share among the nation's 35 cash-card lenders. The business of cash cards contributed to over 60 percent of the bank's net profits, Hu said.
The nation's average bad-loan ratio for cash cards stood at 1.418 percent as of the end of July, while Cosmos reported a NPL ratio of 0.792 percent, according to government statistics.
Due to the high costs required for serving holders of platinum credit cards, the bank's new strategy has been to launch platinum cards co-branded with other companies, such as Core Pacific City Mall (
Cosmos currently has more than 1 million credit-card holders, but it did not say how many of the co-branded cards it hopes to circulate.
China Airlines hopes to bring in 100,000 applicants by the year's end, said Alex Liu (
To improve risk management in its card business, Cosmos established the nation's biggest call center in Chungho City early this year, with 800 workers employed to do telephone marketing, collect debts, and offer consultation to their cash-card and credit-card holders, Hu said.
Many Taiwanese credit card lenders, however, are losing money as their credit and operating costs are too high and their client base too small, Fitch Ratings said in its latest report last week.
"There are 54 card issuers in Taiwan, most with under 800,000 cards issued, a level which we view as the minimum scale for profitability," Fitch said in the report aimed at evaluating the performance of Taiwan's banking sector.
Fitch's report concluded that the better-managed private banks in Taiwan benefited from the expansion of retail banking, through improved asset quality, increased diversification of revenues, stronger fee income growth and enhanced risk management.