Chinese Credit Card

Shanghai Pudong Development Bank and First Sino Bank are teaming to issue the first renminbi-denominated credit card in mainland China. However, the new card is primarily targeted at Taiwan business people in the China, according to The RAM Report ( First Sino Bank, an affiliate of Taiwan’s Bank SinoPac, is also owned by Hong Kong-based Lotus Worldwide and Shanghai Pudong Development Bank. Earlier this year, Citigroup acquired a 5% interest in Shanghai Pudong Development Bank in an effort to enter the Chinese credit card market, with plans to issue a co-branded local currency card later this year. In March, Citigroup received permission to carry out foreign currency transactions, enabling it to expand its consumer operations. Citigroup first launched consumer banking operations in China in 2001. Only 20 million consumers carry credit cards in China.


BofA Punitive Rates

Disclosure in regard to the application of punitive interest rates is improving. This week, Bank of America is notifying cardholders that its 23.99% punitive rate will be applied if the cardholder is reported 60 days past due by any creditor or if a lien or judgement appears on the cardholder’s credit report. BofA currently applies the punitive rate to accounts that have three late payments or three over-limit infractions within twelve consecutive billing cycles. Since the introduction of punitive interest rates in 1995, most of the top issuers have provided little disclosure on punitive interest rate policies. Many issuers simply stated in the T&C that any change in credit worthiness may affect the cardholder’s interest rate. In the wake of lawsuits challenging bank credit card pricing practices, issuers are beginning to detail the trigger events of their punitive pricing policies. Several issuers state that two defaults in a twelve month period will trigger the punitive interest rate.



MasterCard International reported that its gross dollar volume in 2002 for
Latin America rose 26% as the number of cards issued in the region
increased 11.6%. For MasterCard, the Latin America region is about the same
size as the Canadian market based on card volume. However, based on the
number of cards issued, Latin America is twice the size of Canada. During
4Q/02, MasterCard handled $8.9 billion in GDV for Latin America, which
included $5.6 billion in purchase volume, and $3.3 billion in cash advance
volume. At the end of 2002, the number of card accounts stood at 35.3
million representing 44.5 million cards-in-force.
By comparison the Canadian market produced $8.9 billion in 4Q/02 volume
from 18.5 million accounts.


Card Debt 2002

American consumers ended 2002 with $660.9 billion in bank credit card debt, an 8.8% increase over the previous year. The growth was driven by MasterCard’s 14.5% gain in credit card outstandings last year, as the country’s second largest payment card network overtook VISA as the largest provider of bank credit cards. At the end of 2002, MasterCard had 266.9 million credit cards in-force compared to VISA’s 258.4 million. It is expected that MasterCard will surpass VISA in outstandings this quarter. However, VISA maintains a much larger share of credit card volume, 42%, versus MasterCard’s 34%. VISA also dominates the off-line debit card market. The overall growth in bank credit card outstandings last year was an improvement over 2001’s paltry 6.9% gain, but well below 2000’s 16% gain in outstandings. Since 84 million U.S. households have at least one credit card, the average bank credit card debt per household now stands at $7,868. Retail credit card debt is expected to fall between $95 billion and $98 billion for 2002, according to CardData ([][1]).

U.S. Bank Credit Card Loans 2002
Brand EOY02 Chng Share
VISA $289.7 billion +4.7% 43.8%
MC $285.8 billion +14.5% 43.2%
DIS*: $ 51.1 billion +3.7% 7.7%
AX**: $ 34.3 billion +7.2% 5.2%
TOTAL $ 660.9 billion +8.8% NA

* Discover’s year ended 11/30/02;
** American Express does not include charge card outstandings

Source: CardData ([][2])




JCB, Sony, and Toppan Printing, have developed the world’s first smart
card combining “FeliCa” contactless interface and EMV contact interface
capability in a single smart card chip. The new “DualPlus” card
will be issued to JCB employees in May when the company headquarters move
to a new location. Contactless functions will include building and floor
access control as well as cafeteria and vending machine post-payment, while
contact applications will support employee benefits. Some cards will also
be equipped with the contact interface EMV-standard credit application
“J/Smart.” Sony says the linkage function of “DualPlus” enables further
potential benefits such as the inclusion of contactless payments in the
cardholder’s loyalty point program through a home card-reader. Also, in the
future the addition of type B communication capacity, coming into wider use
in government applications, promises even greater flexibility.


FCNB Cards

While Spiegel’s First Consumers National Bank is pulling the plug on more than 700,000 VISA and MasterCard accounts today, the move will not affect its $2.3 billion retail credit card portfolio which includes the Eddie Bauer, Spiegel Catalog, and Newport News cards. FCNB was notified February 14th by the OCC to liquidate its bank credit card portfolio. The OCC required FCNB to stop accepting new credit card applications and stop granting credit line increases to any of its existing credit card accounts; and to notify its existing cardholders that FCNB will not accept any new charges on their accounts after April 1st. Meanwhile, Standard & Poor’s Ratings Services lowered its ratings on all classes of First Consumers Master Trusts. However, the closing of the underlying bank card accounts may have some short-term positive impact on the portfolio payment rate if higher quality obligors pay off their accounts in full or complete balance transfers. In the longer term, S&P believes it will most likely have a negative effect, resulting in adverse selection from reduced payment collections and fewer creditworthy obligors remaining in the pool. In addition, eliminating the cardholder’s ability to use the card for purchases and cash advances may also reduce the incentive to repay the loan to keep the credit line open and may lead to higher charge-offs. A slowdown in obligor repayments will likely extend the ultimate repayment period of the ABS transactions and increase the loan loss exposure period. First Consumers is the 28th largest bank credit card issuer in the USA, according to CardData ([][1]), with 1,439,479 accounts and $1,059,783,754 in outstandings as of 12/31/02. (CF Library 2/22/02; 4/23/02; 8/23/02; 3/5/03)




The number of VISA credit cards issued in Thailand jumped 46% last year
to 2.8 million cards. VISA credit cards now makeup 80% of the total credit
card market in the country. VISA has also issued 4.5 million debit cards in
Thailand. MasterCard has a total of 1.46 million debit and credit cards
in-force. VISA says overall credit card volume increased 30% to THB187
billion. VISA also noted that delinquency plunged from 7.7% in 2001 to 4.8%
last year. Banking regulators passed new rules in 2002 limiting punitive
interest rates and late payment fees.


VISA Truncation

VISA unveiled a new account truncation program yesterday that requires merchants to eliminate all the digits of a cardholder’s account, except the last four, from store receipts. The new policy also requires merchants to drop the card’s expiration date from receipts. The policy will go into effect July 1st, and in its first phase, affect all new payment card terminals. VISA says the move is an effort to fight identity theft and is already in practice by most major merchants. The move is also linked to bill sponsored by Senator Dianne Feinstein (D-CA) which would require merchants to drop the all the digits of a cardholder’s account, except the last four. Senator Feinstein attended VISA’s press conference yesterday in Washington. MasterCard has already adopted a truncation policy which goes into effect in two years. VISA also reported yesterday that , fraud within the VISA system has fallen to an all-time low of 7 cents per $100 transacted.