Wirakusumah, AIG’s regional business head for the Asia-Pacific
consumer finance group, is a seasoned non-bank contender in a
bank-dominated cards industry. He talked to CI about the
organisation’s growth strategy and prospects for the Asia-Pacific

During his ten years at GE Consumer Finance, Ridha Wirakusumah
turned a money-losing business into a high-growth and highly
profitable operation, and grew assets from $1 billion to over $10
billion. On his watch as head of banking for Asia, GE introduced
over 100 new consumer finance products and derivatives, made three
acquisitions and built a consumer finance franchise through
high-profile partnerships with local and international financial
institutions throughout the region, such as Bank of Ayudhya, Tesco
and State Bank of India.

In his current role as regional business head for the Asia-Pacific
consumer finance group at global financial services group AIG,
Wirakusumah contends that AIG has a unique advantage in its
insurance agency force.

In an interview with CI, he said: “The AIG Life division is in 13
markets and usually ranks number one or two in these markets. There
are more than 20 million policyholders. In theory, AIG does not
even have to go out and look for new customers as I can work with
the agents to tap into the existing insurance customer base.” This
is in addition to traditional channels currently utilised such as
direct sales agents, telemarketing, branches and partners.

A more competitive market

He does not think that AIG’s consumer finance venture will be an
issue with the many bancassurer relationships that the insurance
side has with banks in the region. “I don’t think it is competing
at all actually,” he asserts. “It is like AIG selling life
insurance directly through their agents and through banks – these
are two different channels.”

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AIG’s advantage in distribution and customer base is key as “the
consumer finance business is actually very commoditised. If you
have a pretty good system and credit you can almost lend
instantaneously because it is a lot easier to lend to one person
than analysing the balance sheet of a company. Consumer finance is
easier than corporate banking.”

Because of the commoditised nature, Wirakusumah reasons that
“consumer finance in Asia is going to be a lot more competitive in
the future. There is a lot more yield in consumer finance than
corporate and a lot more banks are jumping onto the bank bandwagon.
It will be harder to be successful in consumer finance.”

His strategy is thus to play on “the strength of our parent on the
insurance side. We need to think of products that have some sort of
protection on the insurance side.”

He added: “In 20 years’ time, the regular guy will always have
three to four credit cards and given increased consumer
sophistication, he will become choosier and concentrate on cards
that give the best value. You don’t really care which bank the card
is from. Cards will become more and more commoditised – everyone
will need cards like they need toothpaste.”

Finite number of offerings

Scale is thus important in order to effectively execute strategies
in this market scenario. “There is only a finite number of options
in credit card offerings, so there will be a dichotomy between huge
players who can plough in money for investments, and small players
who are getting squeezed because a guy who has 2 million credit
cards can do a lot more with a programme than a guy with 200,000
credit cards,” he said.

“I envision that there will be more and more consolidation in the
consumer finance space unless the smaller banks are using cards
only for their own pride. For example, in Hong Kong only a handful
have more than 100,000 credit cards in circulation. It might not
kill them but it might not get them anywhere either. Thailand is
already crowded in the card market – not a lot of people have
credit cards and the credit card penetration still has some way to
go, but there are enough players in the market already.

“I think it is probably a safe assumption to say that if we were to
survive in the consumer finance industry, you have to look at all
tools possible, including inorganic growth.”

In his presentation at the recent VRL KnowledgeBank’s Cards and
Payments Asia-Pacific conference in Hong Kong (see page 18),
Wirakusumah highlighted that “partnerships are one of the ways to
build scale, but it need not focus on distribution only. It could
be any type of partnership, such as Deutsche Bank with ECS, which
focuses on the back office and allows everything to be outsourced
except underwriting.”

Presence in Asia

AIG Consumer Finance is currently in four Asian markets – the
Philippines, Taiwan, Thailand and Hong Kong. It is a latecomer in
the major growth markets in Asia, having opened in China last
April, and has made two acquisitions in India since it received its
finance company licence last October.

Commenting on AIG’s prospects in China, he said: “In China it’s
hard. It is a very nascent market and we need to be a bank to be
able to issue credit cards. There is also the foreign ownership
limitation on local institutions. I think China’s growth in credit
cards will be explosive and it will not be easy to get in, but at
the moment credit cards are completely out of the question for

Looking at the other Asian markets, he said: “In my view, Vietnam
is pretty virgin territory. Taiwan and Korea are already saturated.
Thailand is getting very saturated and there is some scope to grow
in Indonesia and Malaysia. Japan is interesting on the credit card
side and is not as penetrated as Korea. There is still some growth
– not so much on cards but the change in behaviour from charge
cards to credit cards.”

Wirakusumah foresees that there will be a lot of consumer spending
in the next 12 months. According to the Chinese calendar, this is
the Golden Boar year which is a good year for building families and
getting married. “From that angle, there will be a lot of spending,
sometimes reckless spending, to buy a new home or buy a new
television set in Chinese-centric markets such as China, Hong Kong,
Taiwan and Singapore. Consumers do not worry about money as there
is plenty of credit – there will be a lot of reckless borrowing and
reckless lending. So consumer finance players – beware! It is
prudent to ensure that your credit risk and operations are spick
and span,” Wirakusumah said.