The credit card business is one of the businesses that has been adversely affected by the COVID-19 pandemic because a credit card serves as a payment tool in lieu of cash, which means that credit card spending and credit card loans tend to decline whenever there is an economic downturn.
A survey conducted by KResearch on credit card spending in the Bangkok Metropolitan area during 1Q21 shows that up to 80 percent of the respondents intend to only make partial monthly installment payments. This not only reflects financial fragility of borrowers during the COVID-19 pandemic, but also presents an ever increasingly complex challenge for credit card service providers. In spite of this, the Bank of Thailand's proactive efforts in supervising credit card loan portfolios and debt restructuring, plus the extension of its debt mediation program to June 30, 2021, will likely help improve the financial position of borrowers and ease the impact of credit card debt overall somewhat.
Regarding the 2021 outlook, KResearch assesses that the credit card business will continue to be threatened by the persistent COVID-19 pandemic and sluggishness seen in economic activity, particularly the tourism and service sectors. Given this, we expect that outstanding credit card loans in the system, including those of banks and non-bank operators will remain unchanged or shrink in 2021 within a projected range of (-) 1 to (+) 0.5 percent, against the 1.6 percent contraction in loans reported for 2020. Amid increased uncertainty foreseen in business conditions, it is expected that credit card service providers will become more cautious in their marketing strategies in order 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, while also paying close attention to the quality of loan portfolios; NPLs from credit cards have yet to increase substantially, thanks to the BOT's relief measures for borrowers and relaxation in its debt classification. Additionally, credit card service providers may have plans in place to introduce new types of retail loan products as part of their attempts to expand business opportunities to take advantage of the Thai economic upturn ahead.