As related, ICBC had issued over 280 million bank cards by the end of 2009, where more than 52 million are credit cards. Last year, ICBC issued 13 million credit cards, an increase of 33 percent from a year earlier. ICBC retains its dominance as the largest credit card issuer in the country by a "Triple Jump" in a year to overtake three credit card giants US Discovery Card, American Express and Capital One. ICBC is now trailing JP Morgan Chase & Co, Bank of America Corp and Citigroup Inc in credit card issuance.
Data shows that as more and more new cards are issued, ICBC bank card is the preferred choice for Chinese folks to pay for everyday spending. In 2009, expenditure volume using ICBC bank cards went up to nearly RMB 1.5 trillion. Amongst, the annual credit cardholder expenditure volume reached nearly RMB 450 billion, a surge of 76% over last year, accounting for one third of the market share of credit card expenditure in the country. The credit card overdraft shot up 115% from a year earlier.
What amazes the international credit card giants not only the "Chinese speed", but more, the outstanding risk management of ICBC on credit cards. As of December 31, 2009, ICBC's bad loan ratio on credit card fell to 1.54 percent, or down 0.5 percentage points from the beginning of the year, a percentage well below the 6% or above at major global rivals, who have been ravaged by the worldwide financial crisis.
Good Environment Speeds up the Development
It can be said that the rapid and healthy development of ICBC credit card business is an epitome of China's thriving bank card industry. Despite China starts later than the western developed countries in bank card payment, China shows her advantage in being a late-entrant to the crowded space by its recent years of gathering pace.
China goes by leaps and bounds and only spends 24 years to finish what the developed countries have achieved in more than 50 years. Underpinning the growth of the bank card industry is an unarguable truth that China's macro-economy policy and economic environment has played the role. In particular beginning from the second half of 2008, China government faced the intricate economic challenges by expanding investment with the help of pocket books of its own consumers.
China is rightly lauded for keeping its economy humming and shines a light during the downturn. The continual healthy economic development increases credit supply again, especially when China government rolls out all the measures to expand internal consumption. This appeals to the vast majority to spend and creates a large base of bank card consumers.
In this upturn going forward, bank card as one convenient payment instrument is brought into fully play to boost consumption, like "a horse pulling this wagon of consumption chugging along". The prevalent use of bank card for payment not only lowers the transaction cost in the payment scheme, but creates a better environment for making payment.
Credit card facilitates spending since it allows short-term credit. Cardholders tend to actually spend if given an opportunity, either ad-hoc or potential. The speed and magnitude of spending is enhanced in the presence of credit cards. This is very evident in stimulating consumer spending and economic growth.
According to the study by international authority, GDP rises 0.5-0.8 percentage point for every increase of 10 percentage points in the ratio of total retail sales of consumer goods paid by using credit card. Chinese government has taken drastic measures in policy formulation to support the growth of bank card sector, promote the wide acceptance of credit cards in the country and offer a good external environment for China's credit card industry to gallop ahead.
Leading the Way by Innovation
Innovation is the driving force behind the credit card service. ICBC has always placed innovation as the key competitive edge to move forward. New products, improved services, optimized business process are just part of the new strategic play to start from a high ground.
Last year, ICBC as one of the earliest commercial banks in the country taking part in the R&D of chip cards was the first to launch chip credit cards. This new change of card media is heralded as a revolution since chip credit cards are safer, more advanced and widely-used than the magnetic-stripe cards. A chip credit card has an embedded microchip that can store much more information. The new chip cards not only perform all the banking functions of magnetic-stripe cards, but also include a line up of intelligent functions for offline transactions, contactless transactions, member management and bonus point programs, "One card, Multiple use". At present, the proprietary ICBC chip credit cards support two standards: International EMV and Chinese PBOC 2.0, and branded under China Union Pay, VISA and MasterCard. ICBC chip credit cards are now widely adopted in transport management, railway passenger ticket, highway toll, membership management, commercial co-brand, social security and metrolink, etc.
In the innovation of credit card functions, ICBC makes full use of credit cards as the payment media and channels to combine the use of credit card and spending credit. For example, cardholders are entitled to apply for interest-free installment service for every RMB 600 spent on using ICBC credit card.
In 2009, ICBC's cumulative transaction volume of installment reached RMB 21.2 billion, accounting for a year-on-year increase of RMB 15.8 billion. Overdraft balance surged 115.2% to over RMB 37 billion. More than 80 million cardholders were benefited in terms of man-times. Everybody welcomes this ICBC's approach concerning the welfare of people, helping the people to spend and doing good to the country and people.
ICBC successfully applies the latest IT innovation on the risk management of credit card. An example would be the internal rating and credit scoring system, which play an important role in the control of credit card risk. 31 scoring models are applied in the credit approval and authorization, adjustment of credit limit and collection.
The models raise the accuracy and efficiency in credit authorization. By the year-end 2009, ICBC's non-performing overdraft ratio on credit card was only 1.54 percent, provision coverage ratio went up to 163.8%. ICBC manages to maintain fast momentum while keeping risk under control.
Cardholders First
The recognition and support from the customers are the cornerstones to rapid growth and continual development of credit card business. In light of this, ICBC remains committed to the "Cardholders First" philosophy, quality service, standardized and sophisticated "Mega Service". ICBC is now embarking Express Marketing System as one marketing initiative to sell to targeted customer groups, to issue credit cards to them so that they can use in the shortest span.
In 2009, ICBC also shortens the waiting time for customers in ad-hoc credit limit adjustment and redemption of bonus points. ICBC was the first among the peers to cancel the full-amount interest penalty for overdue repayment of credit cards. The two services greatly help the customers. To improve the quality of service, ICBC set up green channel in many outlets for credit card service and over 100 VIP customer service centers in the country serving the high-end credit card holders.
Meanwhile, electronic banking services including Internet Banking and Telephone Banking, offer greater accessibility of bank card services to every cardholder. Currently, apart from few procedures which must be handled at the Counter like official report loss of bank card or use of bank card to formally register Internet Banking, all other bank card services are available for cardholders at the Internet Banking.
Customers no longer have to rush around the outlets.
In recent year, ICBC continues to install new bank card terminals and devices in an effort to improve the card acceptance environment. As of today, ICBC has a comprehensive service network of more than 30000 ATM and over 340000 POS and over 100 VIP credit card centers in the country. The two VIP customer service centers in Indonesia's Jakarta and Macau are now open, signaling a presence of a service network for ICBC domestic and overseas branches working together to serve high-end customers.
Besides, ICBC gathers its pace in signing up member merchants or discount merchants. The number of merchants joining the shopping circles is growing. As of today, ICBC has 450000 member merchants, accounting for one-third of the merchants affiliated with the banks in China. Type of merchants covers most of the retail spending areas, clothing, food, shelter, transportation and entertainment, etc.
Based on this, ICBC enriches its value-added services to cardholders as a token of appreciation to all the customers. An example would be the "Spend every day, Travel every month, Prize every year" for redemption of bonus points into travel tours. Subsequently, ICBC organized 9 tours respectively to Yangzhou, Guizhou, Jiangxi, Jiangsu, Hubei, Beijing, Shandong, Zhejiang and Hainan.
A total of 4102 cardholders joined the tours. ICBC Macau launched the "Go Macau to Celebrate the Ten Years of Return to Motherland" for cardholders who have spent more than RMB 1 million cumulatively last year. The program including air tickets, accommodation at star-class hotel and discount at 200 merchants was warmly welcomed by the cardholders.
Start from a High Ground
As ICBC escalates its overseas presence in recent years, credit cards with ICBC logo also stride boldly to the world stage along the footprint of ICBC overseas affiliates. ICBC credit card is a "golden key" for ICBC to tap into the retail banking market of the country where the ICBC affiliate is located. Up till now, ICBC has issued 160000 credit cards overseas and secured a customer base of loyal cardholders. This paves the way for ICBC to move forward its credit card business overseas.
ICBC's credit card business maintains its strong momentum as the New Year turns to 2010. In January, daily consumer expenditure volume on credit card was RMB 2 billion and RMB 2.4 billion at its peak. This is the new record in the 20-year of credit card issuance and shows the big potential of the credit cards in serving customers, stimulating spending and expanding internal consumption.
Looking ahead, as Chinese economy moves steadily under optimized pace, bank card organizations in China including ICBC will continue to write new chapters in bank card business and display the "Chinese Speed" despite the global plaque of uncertainty.
