Thursday, December 27 2012 17:40
Tough competition in card market makes banks take up hazardous and low-predictable loan retail
ArmInfo. The intensifying tough competition in the card market, alongside with such impartial restrictive conditions as acute shortage of new corporate clients and the declined solvency of most part of Armenia's population due to the global financial and economic crisis, keeps on seriously adjusting the banks' work on the card segment development, the 6th issue (December) of the analytical bulletin "Armenian Banks in Card Business" of the Agency of Rating Marketing Information (ArmInfo) says.
The Agency's analysts think that the primary development of the market has almost run its course. Over the past 10 years, the driver of that development was the salary projects and the demand for card products by the customers with average and higher income. However, the post-crisis buoyancy in the consumer sphere, related to some enhancement of business activity and gradual recovery of the transfer component of economy, is opening a window of opportunities in the complicated and hazardous segment of individual card loan retail. ArmInfo's analysts think that in this context the banks have to move in two directions simultaneously.
Firstly, they should keep on strengthening the innovative component of the market and offer serious integral payment products; secondly, they should launch serious activity in the regions of the country, trying to gain possession of the residents of the regions, who are not technologically ready for complicated bank products. Both tasks are connected with high initial expenditures and certain credit risks, which are rather hard to assess due to low stability, observability and predictability of individual incomes. The experts think that the potential capacity of this segment can be assessed at 1-1.5 mln bankcards in case of a favorable macroeconomic situation.
The Armenian Credit Reporting Agency might be helpful to the banks in assessing their credit risks, but is falling short of its mission and consults financial market players only, which is hardly enough for meeting the growing demand for information, especially now that retail lending is on the rise.
Meanwhile, the Government's project to boost non-cash trade is expected to stimulate the card business. Though faced with strong confrontation from the trade lobby, the Government is strongly committed to integrate cash and POS-terminal transactions. This is going to be a hard technological task, but if solved, it will make bankcards a universal means of payment and will strengthen the market's resources.
Now that the banks are testing the new ArCa interface, many of them are appearing with new card products. Still the primitive cash withdrawal remains the key transaction on the card market, leaving the banks without the cherished balance.
As of Nov 1 2012 Armenia's banks had issued over 1,083,000 active cards, with 941,000 of them issued in the framework of the Armenian Card (ArCa) national system mostly under payroll card programs. In 2012 the number of plastic cards in Armenia grew by 23.4%: the number of ArCa cards grew by 6.5% to 394,000, the number of Visas by 41.4% to 445,000, that of MasterCards by 30.3% to 204,000.
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