High profits lead to stiff competition in credit card market

Vietnam International Bank (VIB) recently launched its VIB Zero Interest Rate Credit Card, which is free of interest for all card expenses. VIB is the first bank in Viet Nam to waive interest rates for cardholders for five years of their cards’ validity, instead of the typical period of 45 to 60 days.

In addition to waiving interest rates for all card transactions, VIB will also waive transaction fees in the first three months from the card’s activation date.

At HSBC, the Visa Cash Back Card allows cardholders to get back up to 8 per cent of the total they spend at grocery stores and supermarkets with a maximum value of VND200,000 per month. In addition, cardholders are entitled to unlimited refunds at the rate of 1 per cent for insurance and education expenses and 0.5 per cent for other spendings. Cardholders will have the balance automatically refunded to their card account each month.

According to experts, with more than 70 million adults and the fastest growth in both income and spending in the region, Viet Nam is showing its potential as a lucrative credit card market.

As Viet Nam is a developing country with a burgeoning middle class, a large unbanked population and climbing purchasing power, credit card products have much room for growth, business information provider StoxPlus said.

Though the central bank has not released an updated count of bank cards issued in the country, the number reportedly reached 147.3 million by the end of September last year, up 20 million after only one year. Credit cards, in particular, showed a very fast growth rate. By the end of Q3 2018, there were 4.6 million credit cards issued in the country with total trading value reaching approximately VND50 trillion, up by 50 per cent over the same period of 2017.

Investing in credit cards has brought large profits for banks because the interest rates of card loans are higher than those of other loans. They can earn stable revenue from annual fees, withdrawal fees and overdue debt penalties.With such promising sources of revenue, competition in the countries credit card market has become stiffer with the participation of both foreign and domestic banks. Shinhan Bank, for example, has set a goal to become one of the top three credit card issuers in Viet Nam in the next three years.