Credit card boom assessed in Thailand

The latest credit-card boom in Thailand is an opportunity for banks to significantly increase their earnings, but they also face more costs for risk-management systems, customer databases and marketing in a highly competitive field.

The conclusion was reached by Thai Farmers Research Centre, which forecasts that the number of cards in circulation should reach five million by the end of this year, nearly double the total of 2.56 million at the end of last year. Card spending is also forecast to nearly double to 275 billion baht.

The main driver of expansion was the Bank of Thailand's decision to abolish the 15,000-baht minimum monthly salary requirement for card applicants. The age requirement has also been reduced to 20 years from 22, and the minimum monthly payment to 5% of the outstanding balance from 10% previously.

Card growth also jumped sharply when the central bank cut the minimum salary requirement to 15,000 baht from 20,000 baht in late 2000. The number of cards rose year-on-year by 45.4% to 2.56 million at the end of 2001. Banks' earnings from card fees and services rose 21.25% to 6.38 billion baht.

How aggressively banks respond to the latest changes will depend on their appetite for risk, the researchers say.

"The ways and means of reducing risk include establishing lower ceilings to available credit lines, setting their own minimum age requirements, or designating types of employment that are ostensibly more secure."