Credit cards are key for stimulating China's economic growth

Written by Fay Zhou || June 13 2013

From the data released by People’s Bank of China for the first quarter 2013, the transaction volume of bankcards has reached to 100.27 trillion RMB, which is a 7.7% increase from the first quarter in 2012. The accumulated credit card issuance reached 343 million, which gives a credit card holding per capita is 0.26.

All the figures from the first quarter of 2013 indicate an upward trend of bankcard payment in China. Last year (2012), credit card transactions led to 0.32% increase in the growth of domestic consumption. It shows that credit cards are an increasingly important part of supporting domestic economic growth.

Stimulating domestic consumption is still very important for China at this point of its economic transformation as it seems that cards are one of the best tools to increase consumer spending.

Amount of Credit on Issued Credit Cards in China

Chart showing China Cumulative Credit Card Issuance

In 2012, the value of total credit card transactions reached 10 trillion yuan, which was a 31.6% increase from same period previous year. However, the credit card penetration still remains very low in China - so still a market with potentially high growth.

Most credit card holders are concentrated in the first tier cities. Using the same rewards and ease of use benefits, banks are working to expand the usage into 2nd and 3rd tier cities.

In addition to rewards and acceptance, to improve the credit card business, banks need to focus on security. The increase in credit card fraud cases and different types of criminal methods are hindering growth of the credit card business. Banks should use newer technology and service terms to protect customer right and reduce customer concern about security. Moreover, an attractive credit card reward scheme and convenience repayment system can significantly increase the customer desire for consumption.

In order to expand the credit card market, banks should keep innovate more types of credit card service with local merchants or even e-commerce merchants. We believe the credit card usage will be more widespread in the future once the credit card service gains more customer loyalty and popularizes in the second and third tier cities in China.