Monday, January 3, 2011

Reeling in the big spenders

COMPETITION is hotting up in the credit card market here, especially for the growing number of people regarded by banks as either affluent or heading for that status rapidly.

Credit card issuing firms are among the big winners now that Singapore's economic engine is firing on all cylinders, with rising wages lining the pockets of consumers and few out of work.

The card industry is humming as the value of card purchases grows stronger.

But these card issuers report that the growth in credit card usage last year was not evenly spread, with the affluent card segment outperforming the rest of the market in terms of card spend.

Banks use both income and other criteria to determine who qualifies to be part of this elite group of cardholders. The level of assets invested with the bank may be another key consideration.

But generally, income is the main guide and these cardholders tend to earn $200,000 and above a year - far exceeding the minimum annual income threshold for credit cards at $30,000 for individuals at or below 55 years of age set by the Monetary Authority of Singapore.

Whatever criteria they use to define 'affluent', banks seem to agree that the the rapid growth of wealthy individuals here is a sweet spot for card issuers.

Standard Chartered Bank (Stanchart) says that over the past year, it has seen strong growth in all its credit card segments, from cards meant for mass market customers to those aimed at its affluent priority banking customers who earn at least $16,000 monthly or have net assets of more than $200,000 with the bank.

The best performing cards, however, were its affluent priority banking and 'emerging-affluent preferred banking' segments. Spending in both grew at more than twice the pace of other cards.

Other card issuers tell the same story.

American Express Singapore notched up double-digit growth in total spend by its card members for the first 10 months of last year compared with the same period in 2009.

'But the spending by our super affluent base has increased even more significantly for the same period,' said Mr Simon Kahn, Singapore country manager of American Express.

For its part, Citi Singapore says its credit card spend in the top end of this affluent segment 'grew almost twice as fast as the market in the month of October'.

Banks that have so far lagged behind in attracting customers to this affluent card space have upped the ante.

For example, OCBC Bank launched its Elite World Card in September - a move that puts it on a level playing field with the other two Singapore banks.

United Overseas Bank has its Visa Infinite Card and DBS Bank has its Treasures Black Elite Card that cater to the wealthy.

OCBC's Elite World Card members are likely to earn $250,000 and above a year.

Some card issuers are looking at ways to further slice and dice the card market to woo the up-and-coming rich.

Take Stanchart, which in August launched its Preferred World MasterCard for the nascent 'emerging-affluent' segment, which it defines as people typically with monthly income of between $6,000 and $16,000.

While competition in the affluent space is fiercer than before, the incumbents maintain they can expand market share with new offerings and services.

'UOB was the first to introduce the UOB Infinite Card in 2003,' said its regional head of cards and payment products, Ms Gan Ai Im. 'In other words, we've had a seven-year headstart on understanding the needs of this segment.'

'Looking ahead, our investment in the premium segment will be a continuation of what we started seven years ago. Things can only get better,' Ms Gan said.

Ms Alice Fok, head of core cards for Citibank's credit payment products, observes there is definitely 'more competition in this segment as evident from the increased focus on this segment from both local and foreign banks'.

'With many industry players vying for this pie, marketing intelligence as well as customer-focused activities are going to be the game changers. We believe the customer will stand to benefit most from this development,' Ms Fok said.

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