NFC is starting to make an impact on the cards and payment industry in Singapore, with one in three smartphones NFC enabled and over 20,000 merchants accepting payment by mobile wallet. A government initiative to increase broadband penetration is also likely to broaden the reach of e-payments and m-payments, writes CI

In terms of the number of cards in circulation, Singapore’s card payments channel grew at a review-period (2008-2012) CAGR of 8.52% and, in terms of transaction value, at a review-period CAGR of 8.12%. Over the forecast period (2013-2017), the card payments channel is expected to record a CAGR of 5.05% in terms of the number of cards in circulation and 7.35% in terms of transaction value.

Debit card category leads the industry in terms of transaction value

In terms of transaction value, the card payments channel is dominated by the debit card category which constituted 66.2% of overall card transactions in 2012. The category’s channel share is projected to increase to 66.3% in 2017. The value of debit card transactions grew at a review-period CAGR of 7.28% and is expected to post a forecast-period CAGR of 7.46%. The debit card category is projected to record the largest growth in terms of transaction value as customers opt for income-based consumption over credit-fuelled consumption.

Intelligent Nation 2015 to offer support for cards and payments industry

The Intelligent Nation 2015 masterplan, drawn up by the government of Singapore, is expected to provide support to the growth of the cards and payments industry over the forecast period. The masterplan aims to achieve a 90% home broadband penetration rate alongside a computer in the house of every family with school-going children. The masterplan also proposes to make SGD26bn (US$20.8bn) worth of investments in the development of Infocomm infrastructure, which will help to expand electronic and mobile payment platforms to all parts of the country.

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Expected increase in competition due to new law to domestically incorporate foreign banks

Competition among domestic banks is expected to intensify over the forecast period due to a new law issued by the Monetary Authority of Singapore (MAS) requiring banks to locally incorporate their retail business. The new law permits locally incorporated banks to have 25 places of operation and is expected to result in an increase in the number of foreign banks operating in the country. Foreign banks are also expected to align their pricing and marketing strategies with that of domestic banks which will result in intense competition and an increase in marketing and promotional strategies to attract consumers.

Banks use social networking platforms to expand their business

Banks are using social networking sites to increase their card businesses. Citibank Singapore launched the Clear Platinum card which specifically targets social network users and encourages online shopping. Oversea-Chinese Banking Corporation (OCBC) also launched a card which targets Facebook and Twitter users. Other banks, such as DBS, provide virtual cards for online users.

Banks follow highly competitive pricing strategies

When pricing the cards, banks follow highly competitive strategies in order to expand their customer base. The annual interest rates charged by most leading banks range between 24% and 25%. Banks also offer an interest-free period to customers to encourage prompt repayments. Interest-free periods offered range from 53 to 55 days. The cash advance fee charged by a bank varies between 5?6%, depending on the amount borrowed. Banks also offer introductory interest rates and a waiver of the annual fee as a part of their card marketing strategy.

Banks target customer group interests

Banks target large customer bases such as Chinese-Singaporeans, NUS alumni, SingTel customers and members of the National Trades Union Congress (NTUC). SingTel is one of the leading telecom operators in the country and had a market share of 47.2% in March 2013. Banks offer cards targeted at specific customer groups through attractive marketing and promotional strategies. DBS bank offers the DBS NUS Alumni Platinum Credit Card which targets the alumni of National University of Singapore. Cardholders are offered platinum privileges which comprise therapy and spa deals, and one DBS point on every SGD5 spent through the card. Similarly, United Overseas bank offers the UOB Union Pay Platinum Card which offers cardholders special deals and discounts at over 200 dining locations.

Cards with social networking features to encourage card usage

Banks in Singapore are utilising social networking sites to increase their card business. Citibank Singapore Ltd launched the Clear Platinum Card which targets social network users aged between 21 and 35. The bank introduced a variety of programs and marketing strategies to promote the card among the online population. Cardholders are given reward points for online shopping and loyalty points for endorsing the brand by sharing it with their circle of friends or by participating in online programs instituted by the bank. Citibank Singapore also took to social networking sites to market products and deliver eWelcome packs. On a similar basis, the OCBC launched the Frank Credit Card which targets Facebook and Twitter uses. OCBC also targets the 30-50 year old population. Other banks, such as DBS, launched virtual cards for online purchases.

Implementation of the Intelligent Nation 2015 masterplan

The Intelligent Nation 2015 masterplan, drawn up by the government of Singapore, is expected to provide support to the growth of the cards and payments industry over the forecast period. The masterplan aims to achieve a 90% home broadband penetration rate alongside a computer in the house of every family with school-going children. The masterplan also proposes to make SGD26bn worth of investments in the development of Infocomm infrastructure, which will help to expand electronic and mobile payment platforms to all parts of the country.

Migration to EMV cards and enhanced security protection

Banks in Singapore are expected to migrate to Europay, MasterCard and Visa (EMV) chip technology by 2014. In March 2012, the MAS announced that it will institute the program to implement EMV cards and will also initiate the necessary infrastructural upgrades at automatic teller machines (ATMs). According to the Association of Banks in Singapore (ABS), all ATM cards and cards with a cash withdrawal function will be embedded with an EMV chip as well as magnetic stripe technology. ABS also said that it would implement an SMS alert facility to inform card members about cash withdrawals made abroad, and that it will work with member banks to enhance internet security by issuing online tokens with features such as the authorization of transactions through a customer signature. Internet purchases will also be protected by a one-time password that will be sent via SMS. All of these planned security upgrades are expected to encourage customers to undertake more transactions both on and offline.