Dennise Williams
Contributor
There is estimated to be 2 million credit cards issued in Jamaica, yet high-level sources tell the Business Observer that only 16,000 cards are actually used. This has created a highly competitive marketplace and forced the two newest entrants to the commercial banking sector, JNBank, and JMMB Bank, to push for even higher engagement in the less than one percent of the population that actually consider credit cards a part of their financial plan.
That said, according to the Bank of Jamaica, credit card debt is valued at $40.2 billion in May 2017 which a 17 percent increase/decrease from the 12 month period.
And so if only 16,000 cards account for so much value to banks, the race is on for the share of wallet. Banks earn from credit cards in several ways: interest, fees charged to cardholders and transaction fees paid by businesses that accept credit cards.
Therefore, banks are pushing activity in a variety of creative ways. It is now standard practice for banks to offer points that customers can redeem for various services such as travel.
Sagicor Bank has used the power of its brand to offer credit card holders benefits at Sagicor Investments and the Jewel Hotel lines. In other words, Sagicor Bank is the only bank that allows credit card points to be used to invest in sister company, Sagicor Investments Sigma Funds. And card holders can use points for booking rooms in the various Jewels Resorts around the island. However, highly placed sources reveal that Sagicor Bank is a distant fourth place in terms of market share. This is mainly due to inheriting a portfolio of only 11,000 credit card clients from RBC Bank when it purchased same in 2015. And of the 11,000 credit card clients, sources did not state the active user rate. And so Sagicor has had to build from scratch. The big guys in the market, Scotia and National Commercial Bank Financial Group have the lion’s share of active credit card users. NCBFG recently offered interest free loans to holders of its Lovebird Keycard for 3 months as a way to push engagement in the card. Again, highly placed sources who declined to be quoted shared that the Lovebird Key card has struggled in the rewards market due to customer dissatisfaction with the limitatons imposed by its travel partner, Caribbean Airlines. Chief complaints, according to sources, is the gap between flights out of Kingston to Miami and the flights in. Further, when points are redeemed from the card, paying customers to Caribbean Airlines get priority and so many KeyCard holders are forced to reschedule.
Scotiabank also has its share of efforts to excite the credit card market. Recently, it increased its cash back offer on select cards from 3 per cent to 4 percent. Further, the bank has encouraged its clients to turn in its Magna branded card for a cash back card. Many customers, according to well placed sources have declined this offer because the cash back cards pay only once per year while the Magna branded card pays out 3 times per year. That said, sources suggest that despite an annual fee of over $12,000 per year, Scotia has found a winner with this Areo branded credit card with many travel perks which include having your tickets booked and paid for by the Scotiabank customer service.
And so the question is what will be next to drive credit card usage by Jamaicans? It has been suggested that new entrants are considering how to tie credit cards to mobile money in which persons simply swipe their phone or send a data request rather than carry an actual card. The challenge, sources say, is that Jamaica’s internet penetration is low, with more than 64 percent of Jamaicans not online. This means that the traditional manner of cards will still dominate teh market for another five years according to well placed sources.
So what is next? It would seem that banks are considering tying credit card points to customer engagement in other banking services such as loans or hitting savings targets. For the persons who consider credit cards a good thing, it could be interesting times ahead.
