The recession is still showing its effects in Taiwan as the industry fails to recover to pre-2009 levels. The channel has seen some growth however. Cards International analyses a report by data and advisory company Timetric on the emerging opportunities in Taiwan’s cards and payments industry
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The Taiwanese card payments channel demonstrated moderate growth during the review period. In terms of number of cards in circulation, the channel grew at a CAGR of 2.41% to reach 119m in 2012. Robust banking infrastructure in the country and a shift towards cashless transactions by consumers contributed to the growth of channel during the review period. Card volume is expected to grow at a CAGR of 2.49% over the forecast period, to reach 135.8m in 2017.
Taiwanese card payments channel presents stable growth
In terms of transaction value, the card payments channel declined from TWD12.6trn (US$400.1bn) in 2008 to TWD10.6trn (US$356.8bn) in 2012, at a review-period CAGR of -4.34%. This was due to the decline in card transaction value by 27.2% in 2009 due to the global financial crisis. While the card transaction value recovered and has shown positive growth since 2010, it is yet to reach pre-recession levels. It is expected to grow from TWD11.0trn (US$373bn) in 2013 to TWD13.2trn ($447.6bn) in 2017, at a forecast-period CAGR of 4.65%.
In terms of number of transactions, the card payments channel posted a CAGR of 0.42% during the review period, increasing from 1.33bn in 2008 to 1.35 min 2012. It is expected to record a CAGR of 1.86% over the forecast period due to an anticipated growth in e-commerce, outbound tourism and usage of contactless cards at POS terminals.
Debit card category continues to hold strong position
Debit cards dominated the card payments channel with a 68.5% share in 2012, followed by credit cards with 29.2%. Debit card transactions at POS terminals decreased during the review period. A number of banks in Taiwan are planning to introduce debit cards with contactless technology in August 2013, which is expected to increase the use of debit cards at POS terminals from 97m transactions in 2013 to 99.7m in 2017, at a forecast-period CAGR of 0.68%.
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By GlobalDataCard issuers are focusing on niche segments to generate revenues
The total population of Taiwan at the end of 2012 was 23.4m and the number of cards in the country was 119m, suggesting an average of five cards per person. To increase card usage in the already mature market, banks in Taiwan are targeting niche segments and offering personalized loyalty programs. For instance, banks are offering a wide variety of benefits such as insurance, free tickets to movies and access to international airport lounges to travellers. For high net worth individuals (HNWIs), banks are also offering benefits such as zero liability protection on lost cards, free airport pickup and other benefits.
Shift towards card payments supported increased levels of card usage
Banks in Taiwan expanded their infrastructure networks across the country during the review period, resulting in an increase in the number of ATMs and POS terminals. The increasing acceptance of cards at retail outlets and a consumer shift towards making purchases using cards resulted in an increase in POS transactions at a CAGR of 4.33% during the review period. It is projected to grow at a CAGR of 2.77% over the forecast period, increasing from 791m transactions in 2013 to 882.6m in 2017. The number of POS terminals in Taiwan recorded a CAGR of 5.07% during the review period, rising from 79,824 terminals in 2008 to 97,295 in 2012. With further increases in the volume of POS terminals, the use of cards is expected to continue to grow over the forecast period.
Citibank Taiwan
Citibank entered the Taiwan cards and payments industry by opening a representative office in 1964 and established its first branch in 1965. To increase its presence in the country, Citibank acquired Bank of Overseas Chinese in 2007.
Citibank offers credit cards, savings and investment plans, mortgage and personal loans and insurance services to customers.
The bank offers credit cards which come with a wide range of value-added services. Citi Diamond cardholders are offered complementary services such as discounts on dining in five-star hotels, access to VIP lounges in airports, international airport service, travel accident insurance, travel protection insurance, travel inconvenience insurance and purchase protection. Citi Privileges cardholders can avail free movie tickets, discounts on online shopping, reward points, and free coupons on purchase of books and magazines.
In order to retain their existing customers and expand their customer base, the bank is issuing co-branded credit cards in association with retail companies such as Far Eastern department stores, The Dream Mall, A.mart hypermarket and CMP. Cardholders are offered services such as free parking, discounts, and priority reservation in hotels and restaurants.
HSBC Taiwan
HSBC entered Taiwan by setting up a full-service branch in Taipei in 1984. The bank initially had eight branches. It acquired Chinese Bank in 2007, after which its branch network increased to 39. In 2009, the bank obtained approval to set up a local subsidiary and HSBC Bank (Taiwan) Limited commenced its operations in 2010.
The bank offers corporate banking, retail banking and wealth management services. Retail banking includes a wide range of personalized financial services and products to cater to customer needs.
The bank, in association with China Airlines, offers three types of credit cards aimed at frequent travellers. Cardholders are entitled to a reward program and the points can be redeemed for tickets and upgrades. Cardholders are offered discounts on the purchase of goods on the plane and other value-added services.
The bank offers credit cards that come with a wide range of value-added services. The HSBC Premier and Advance cards are internationally accepted and can be used for shopping, dining, travelling and making online transactions. Cardholders are entitled to a bonus reward program and the points can be redeemed for gifts such as designer fashion merchandise, gift vouchers, golf accessories and discounts in hotels or restaurants.
Debit cards
Banks in Taiwan offer debit cards with a wide range of value-added benefits to cardholders. HSBC bank’s Premier Visa debit cardholders are entitled to an unlimited number of free withdrawals through the bank’s or other banks’ ATMs. Cardholders are also offered concierge services and public transportation accident insurance coverage.
Taiwan Cooperative bank offers the Easily Cooperative Bank Visa debit card which is internationally accepted by more than 2.9bn Visa merchants across the world.
Credit cards
In order to retain their existing customers and expand their customer base, major banks in Taiwan are issuing co-branded credit cards in association with retail companies. For instance, Citibank Taiwan partnered with various retail outlets and shopping centers such as Far Eastern Department Stores, The Dream Mall, A.mart hypermarket and CMP to offer co-branded cards. The Citi Happy-go cardholders are entitled to free parking in department stores, discounts, reward points for online shopping, discounted hotel rates in selective hotels and travel insurance protection. Citi-CMP cardholders can get reward points as much as six times on purchases made in CMP. Cardholders are offered a concierge service, free parking, discounts on hotels, restaurants and other commercial establishments located in CMP.
Pricing Strategies
Pricing strategies play a vital role in increasing a card’s adoption rate. However, the debit card category is non-responsive to pricing strategies as they are primarily a complementary product. In these cases, banks attempt to obtain a competitive advantage by reducing charges levied on cash withdrawals from ATMs.
In contrast, credit cards are highly responsive to pricing strategies. The costs associated with credit cards include issuance and renewal charges, annual maintenance charges, interest on credit provided after the credit period is over, charges on revolving credit, service taxes, and charges for cash advances and cash transfers. Banks, such as Taiwan Cooperative Bank and HSBC Bank, are offering credit cards with zero annual fees to increase adoption in the country.
Channel growth
In terms of the number of cards in circulation, the debit card category held the highest share of 68.5% in 2012. The second-largest share was held by credit cards with 29.2%, followed by prepaid cards with 2.2%. Over the forecast period, the number of debit cards is expected to increase from 83.5m in 2013 to 89.8m in 2017, at a CAGR of 1.84%. The prepaid cards category is forecast to post the highest growth at a CAGR of 10.05% over the forecast period, rising from 2.9m cards in 2013 to 4.3m in 2017.
During the review period, the number of cards in circulation grew at a CAGR of 2.41%. Over the forecast period, the prepaid cards category is expected to record a CAGR of 10.05% and to hold a significant category share of the unbanked population. The debit cards category registered a CAGR of 2.90% during the review period, increasing from 72.6m cards in 2008 to 81.5m cards in 2012.
The total number of cards in Taiwan increased from 108.2m in 2008 to 119m in 2012 at a CAGR of 2.41%. The total number of cards in circulation is expected to increase from 123.1m in 2013 to 135.8m in 2017, at a forecast-period CAGR of 2.49%.
