Six Hong Kong banks offer spruced up credit card to cash in on summer spending
Dah Sing aims to sell wealth-management products to holders to boost card revenue
Summer means sun, sales in shops and the launch of new credit cards as banks seek to cash in on all that spending.
Since last month, six banks - China Construction Bank (Asia), Industrial and Commercial Bank of China (Asia), Bank of China (Hong Kong), Wing Lung Bank, Citibank and Dah Sing Bank - have unveiled new credit cards.
Industry watchers warn that issuing new cards is costly and that it is not worthwhile increasing the range of cards available in a city where there are already more than enough to go around.
"In order to maintain market share, when a bank issues a new card, other banks will follow, just like the practice in mortgage products," said Kenny Lam, a partner with McKinsey & Co.
There are 17.6 million credit cards in circulation in the city, with each eligible cardholder having an average of four. The number of cards that are used is hard to estimate.
The new cards from Wing Lung and ICBC both targeted summer travellers. Wing Lung is seeking to attract new customers by offering air tickets and coupons for Thai spas as welcoming gifts. ICBC is offering discounts on a travel agency's tours and packages.
Lilian Chong, the head of card business at Dah Sing's retail banking division, said she expected credit card spending in the second half of the year to be in line with that in the first half, which saw single-digit growth.
Lam said marketing and advertising were always involved when promoting new cards. Sufficient revenue - in the form of interest income from users and merchant fees from retailers - can only be generated when holders use their cards often.
Banks found it easy to issue new cards by offering rebates or gifts to new applicants, Lam said, but faced a challenge cross-selling other services to cardholders.
"Banks in the US and Taiwan are even cutting the types of credit cards, because they found it costly to have so many different cards," he said.
Derek Chung Siu-kuen, an assistant general manager and head of retail banking at Wing Lung, said the cost of the business was increasing. "If cardholders are not active users of their cards, it is difficult for banks to get reasonable returns."
In order to boost revenue from cross-selling with its new credit card, Dah Sing offers extra rewards to cardholders for their purchases of wealth-management products. The head of the bank's retail division, Phoebe Wong, said the lender hoped to issue 5,000 to 10,000 of its new cards this year.