Taiwan's credit-card market is expected to undergo unprecedented consolidation next year and banks should readjust their strategies to rectify the wanton issuance of cards over the past few years, MasterCard International said yesterday.
"Taiwan has over 45 million credit cards in circulation among 8 million adults, which is way too many," said Tina Chiang (
"Banks will have to return to basics, reviewing their card products and resorting to customer segmentation to survive," she said.
The number of credit cards issued in Taiwan has grown at a double-digit rate annually since the 1980s when the financing product was first launched.
However, as of October, the market had only expanded by 7 percent this year, displaying a cooling in the once profitable segment.
According to the Financial Supervisory Commission's latest figures, card attrition last month surpassed card issuances for the second consecutive month, underlining the product's waning appeal and a looming crisis for consumer financing-oriented banks.
The surging number of card debtors, or "card slaves," forced banks earlier this month to offer a card-aid mechanism and raise monthly minimum payments.
On Wednesday, Thomas Wu (
Taishin International Bank, the nation's second-biggest credit-card issuer, has emphasized unsecured-loan products, including cash-advance cards, over the past few years, but bad debts have risen lately in the consumer segment, negatively impacting the conglomerate's share price.
But this does not mean that card issuers cannot reverse the trend and make profits next year, Chiang said.
"Banks would have to implement effective credit risk management, improve operational efficiency to cut down on costs, and provide segmented portfolios and differentiated products to secure customers," she said.
In particular, segmentation must be done by analyzing consumers' lifestyles, as diversified services are needed.
Due to tight competition, the nation's 50 banks have mass-issued popular editions of credit cards that do not require annual fees.
"We foresee that banks will again promote products that charge annual fees, but offer more sophisticated services next year as consumers are actually willing to pay for the right services," she said.
Sharing a similar view, Marco Ma (麻少華), Visa International's country manager in Taiwan, announced the organization's new strategy early this month, saying that targeting platinum cardholders will be the major task next year.
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