KARACHI: Bank cards stay out of attain for many Pakistanis despite the fact that plastic playing cards of different kinds proceed to achieve a agency foothold within the nation of 212 million individuals.
There have been just one.68m bank cards on the finish of March, which constitutes a share of three.eight per cent in 44.5m fee playing cards at the moment in existence.
Debit playing cards type virtually two-thirds of the entire whereas social welfare, pre-paid and ATM-only playing cards collectively have a share of 32computer, in response to knowledge from the State Financial institution of Pakistan (SBP).
“Somehow, credit card acquisition has been a challenge for the banking industry,” mentioned Muhammad Anas, head of shopper banking at United Financial institution Ltd.
The entire variety of bank cards has registered no change during the last decade. However its share within the pie has dropped from 15computer to 4pc, due to a disproportionate rise within the variety of debit playing cards, which grew at an annualised charge of 12.1pc since 2009-10.
“Auto and personal loans are need-based products with a natural growth path. That’s the reason credit cards’ receivables are much lower compared with auto and personal loan products,” he added.
Excellent bank card loans amounted to Rs55 billion or simply 7.8pc of Rs708bn of whole shopper financing on the finish of June.
On a year-on-year foundation, bank card loans have elevated by virtually 28computer
On a year-on-year foundation, nevertheless, bank card loans elevated virtually 28computer — a bout of development that Mr Anas attributes to the regulatory push aimed toward selling digitisation of the financial system. “The SBP has incentivised the acceptance side. That’s the reason there’s been major improvement in card usage,” he mentioned.
In line with Mr Anas, the principle causes for the poor uptake of bank cards are an aversion to documentation and a lack of expertise.
“Ours is a cash-based economy. But banks must establish and validate the sources of income of their clients for lending products,” he mentioned.
As for the second cause, he mentioned quite a lot of misgivings exist about bank card prices. Foremost amongst them is the frequent perception that the holders of bank cards need to pay an rate of interest of as much as 45computer. However that’s true provided that somebody fails to pay their invoice by the due date, he mentioned.
Equally, annual charges additionally deter many individuals from making use of for a bank card, he mentioned. The annual cost hovers round Rs3,000-5,000 within the case of a vanilla bank card, though it will get waived altogether if the shopper spends a specific amount inside a specified time interval. “You don’t get to pay any charge if you know how the product works,” he mentioned.
One more reason for the low demand for bank cards is that a lot of individuals consider utilizing bank cards is in opposition to Shariah.
This notion was echoed by the CEO of an Islamic financial institution who informed Daybreak Islamic students have a “divided opinion” on the problem. “Although a few lenders are offering Shariah-compliant credit cards in Pakistan, I have serious doubts about the authenticity of the product,” he mentioned, requesting that he not be named given the sensitivity of the problem.
In line with Zaigham Sheriff, common supervisor of non-public banking at Commonplace Chartered Pakistan, a shift within the notion about bank cards is going down, thanks partly to the “availability of Shariah-compliant cards”.
The Islamic window of Commonplace Chartered affords Shariah-compliant bank cards. He didn’t state the specifics of the financial institution’s share within the bank cards market although.
The presence of interchange cost — a price that the service provider pays to the card-issuing financial institution on each single transaction — additionally discourages companies from accepting bank cards. Lower than a few proportion factors, it’s normally increased for bank cards than debit playing cards.
Chatting with Daybreak, a self-described “compulsive credit card applicant” mentioned 4 banks have turned down his 4 bank card purposes for 4 totally different causes.
The primary time a financial institution consultant informed him his month-to-month wage of Rs70,000 was too low to qualify for a bank card. The second time the financial institution objected to the breakdown on his wage slip that confirmed his take-home quantity was solely half of the “real” wage.
The third time the financial institution seen he was “technically” employed by a contractor, and never the reputed firm that he really labored for. The fourth time, a financial institution consultant blamed a poor report from the Digital Credit score Data Bureau for the rejection of his utility.
“It’s difficult to get a loan against collateral in this country. What gives you the idea that banks will happily extend unsecured credit card loans?” mentioned a banking sector analyst.
“The uptake for credit cards is low because bankers are lazy. They don’t have to lift a finger to issue debit cards though, and that’s why they’re commonplace.”
Revealed in Daybreak, August 19th, 2021