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13 May 2021

Econ Digest

Credit card business in 2021, COVID-19 affects consumers...service providers face complex problems.

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        The credit card business is another business that has been affected by the multiple waves of the COVID-19 outbreak. Card spending volume has slowed down in all customer groups as a result of travel restrictions, social distancing measures and lower incomes of some customers. A KResearch survey about credit card usage behavior showed that in the first quarter of 2021 up to 80% of the sample group in the Bangkok Metropolitan area intended to pay only partial monthly installment, and about 48% of credit card debtors who took assistance measures from financial institutions chose to request a reduction in their monthly installment burden. This reflects the fact that the COVID-19 outbreak has affected the financial status of debtors, which will have a ripple effect on credit card service providers who will face more complex business challenges, including adjusting their strategies to make it the main card that their customers choose to use, stimulating card spending and managing the risk of bad debts that are likely to increase due to the economic slowdown.

        Regarding the 2021 outlook, KResearch views that economic activities, especially in the tourism and service sectors that have not yet returned to normalcy, may result in outstanding credit card loans in the system, including those of banks and non-bank operators, to remain unchanged or shrink within a projected range of -1% to +0.5%, compared to a 1.6% contraction in loans reported for 2020. It is expected that credit card service providers will become more cautious in their marketing strategies to maintain costs and expenses. They will also place emphasis on offering credit cardholders the option to change their credit card limit into cash, with the aim of boosting the use of the credit limit and meeting the need of some cardholders with dwindling incomes, including collaborating with business partners in the online channels to launch marketing campaigns in response to the popularity of card payment in the new normal era that emphasizes security.

        However, proactive debt quality management and debt restructuring, implementation of debt restructuring measures by financial institutions, and the extension of the Bank of Thailand's debt mediation project until June 30, 2021, may help improve the financial status of debtors and help alleviate some of the pressure on the credit card debt quality problems, although NPLs from credit cards have yet to increase substantially. KResearch expects that the NPLs from credit cards in the system to be 1.90-2.50%, which would be close to the level of 1.91% at the end of 2020.

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Econ Digest