|Monday, 18 April 2011 09:35|
PETALING JAYA: The debit card market, which has played a second fiddle in terms of popularity to credit cards, is expected to see a 50% to 70% growth in terms of usage this year as a result of stricter credit card measures aimed at reducing household debts as reported by The Star Business.
The Association of Banks in Malaysia (ABM) said it expected the measures to result in an increase in overall usage of debit cards.
“With the implementation of the latest credit card guidelines, banks will promote the usage of debit cards among the segments impacted by the guidelines so that they are aware of this alternative payment method as well as the corresponding benefits.
“Usage of debit cards in recent years has risen given the consumers’ increasing comfort and familiarity with them. Debit cards also have their own suite of benefits such as discounts, rebates and reward points. These benefits have encouraged customers to switch payment modes from cash to debit cards,’’ ABM said in a statement to StarBiz.
While credit cards have remained popular and have seen growth in usage due to their longer existence in the market, the use of debit card has been gaining popularity as well.
Introduced in 2005, debit card usage in 2010 has grown by 68% year-on-year to approximately RM4.7bil.
However, there are also sceptics. Malaysian Rating Corp Bhd vice-president and head of financial institution ratings Anandakumar Jegarasasingam and RAM Ratings head of financial institution ratings Promod Dass said there would not be a significant shift towards the usage of debit cards.
Anandakumar said most people used the credit cards as a mode of credit rather than a mode of payment.
“Unlike credit cards, a debit card user must have funds in his account. Furthermore, card issuers like Visa, Master, American Express and banks predominantly promote the use of credit cards through various schemes and offers, including the deferred instalment payment. Such schemes and offers often cannot be replicated by debit cards.
“The number of merchants accepting credit cards also far outnumbers the number of merchants accepting debit cards in Malaysia,” he said.
He said apart from being a mode of credit and payment, credit cards have also been established as a “status symbol” with various affinity and co-branded credit cards.
At the same time, there was limited awareness among the consumers and merchants about the benefits of debit cards, Anandakumar added.
Dass said not many people were comfortable with using debit cards, given that the transacted amount would be deducted from their bank accounts.
“While some debit cards may have bonus point accumulation programmes, the points and promotions offered by credit cards are generally more attractive.
Banks also prefer marketing credit cards as opposed to debit cards as they generate significantly more revenue for them.
“It is likely that people are using debit cards for small ticket purchases. Given these behavioural trends and the new credit card guidelines, it is unlikely there will be any noticeable shift to debit cards. Also, credit card holders who resort to revolving their outstanding balances will unlikely to shift to a debit card,’’ Dass added.
The minimum annual income requirement for credit card eligibility has been raised to RM24,000 from RM18,000 previously.
For cardholders earning RM36,000 per annum and less, they can only hold credit cards from a maximum of two issuers and the maximum credit limit for those earning less than this amount had also been capped to double the monthly income of the card holder from each issuing bank.
Debit cards as a payment mode so far pales in comparison to credit cards and charge cards, Dass noted judging on statistics.
Based on the latest statistics, the average value of annual transaction per card for credit cards in 2010 stood at RM9,338 while that for debit cards was merely RM141.
The drop in number of credit and charge cards in 2010 was due to the imposition of the RM50 service tax.
Although debit cards at about 33.5 million cards significantly outnumber credit cards (about 8.5 million cards), Dass added it should be noted that about 73% of debit cards were combined with ATM cards.
Citibank Bhd head of wealth management products Leong Jen Aun said debit card was a good alternative payment method to cash, especially for consumers who separate their everyday purchases such as grocery, petrol and dining from big ticket items.
Based on Bank Negara’s 2010 Annual Report, the number and value of debit card transactions had increased which according to Leong was an encouraging sign moving towards developing a safe, efficient and effective payment and financial system.