The Market Monitor Minding the Nation's Business
Riza Lozada
The local credit card industry, which has been growing an average of five percent a year for the past 35 years, is aggressively pushing for implementation of the centralized credit information database as well as the national identification system to realize bigger growth rates.
Credit Card Association of the Philippines (CCAP) president Harry Gue today said that 6.9 million credit cards are currently issued in the market representing an equivalent to 3 million customers since one customer holds at least 2 credit cards. He said that the CCAP believes that it can tap the market to double the card accounts and still retain credit worthiness.
The group finds that the absence of a national identification system inhibits card issuers to conduct due diligence on the legitimacy of applications due to the of lack of an information database.
Another challenge for card issuers is the absence of credit information sharing through the Credit Information Service Agency (CISA) which is contained in a law passed since 2009 but its roll-out expected only to be delivered within this year.
Gue said that within CCAP, the sharing of information has been a regular practice. This does not mean that CCAP is completely reliant on its database since CISA by law is mandated to require all financial institutions to share data.
Ccap chairman Simon Calasan sai its own database is “a very good indicator” of determining the customers’ paying capacity.
But the group still expects that it will be a successful roll-out for the credit information bureau, CISA, to further advance the issuing of credit cards.
“The (creation) of CISA is a law where all credit and financial institutions have to report to this central entity so we are reliant on cooperation and collaboration among credit card companies to share that data,” Calasan said.
He said CCAP members devised the database which were compiled from private firms such as the TransUnion credit information service.
“They (TransUnion) only have access to credit card data. Ideally we have to access all kinds of credit information, loans, mortgages,” according to Calasan who also noted that only CISA under the law provides this kind of service.
CCAP currently has 14 members including new entrants Chinabank and Asian United Bank which will be issuing credit cards this year.
Commenting on the exchange of information to advance credit card usage, Gue said, “on the availability of information, some maybe in the manual process, some may have not access the data within the organization readily available.”
“In the card credit business, you cannot operate manually, you will not last because of the number of firms offering cards that is why all of us have to adopt quickly in terms of using technology to process transaction.”
He added that Ccap wants to get information out of the credit card industry which is basically tapping other institutions and possibly with the mandate of Cisa.
The credit card industry is also benefitting from the improvement in the default in payments which has been going down 25 basis points a year attributed to tighter regulations of the Bangko Sentral Ng Pilipinas (BSP), prudent credit practices and combination of efforts from private credit bureaus and the government.
Credit card usage at local malls have reached 35 percentwith 65 percent of transactions through cash basis compared to developed countries with credit card usage at 80 percent, according to CCAP.
The industry has a lot of room for growth, the group noted.
The group said that with the bank liberalization policy, three big multinationals are planning to enter the credit card market.
“The market is not yet saturated. There is opportunity for growth but the right infrastructure has to be there to ensure the capacity for revenues,” the group said.
