New regulations by the central bank contribute to the bleak outlook for the credit card industry in the year ahead, just as a big player such as Citibank Indonesia is set to re-enter the market.

A Bank Indonesia (BI) limit on credit card ownership has watered down expectations that the number of circulating credit cards will grow by a modest 5% to 17m this year from 15.7m in 2012.

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The regulation, issued in June 2012 and went into effect this January, limits people with monthly incomes between IDR3m (USD310.56) and IDR10m to a maximum of two credit cards.

"As a result, credit card issuers will face tough competition among themselves to prevent customers from closing their own existing card accounts. At the same time, they have to compete to be the one chosen by new customers," according to Steve Marta, general manager of the Indonesian Credit Card Association (AKKI).

The return of Citibank Indonesia, scheduled to be in the second quarter of 2013, will only exacerbate the stiff competition in the market. Citibank was barred from issuing new credit cards for two years, after the death of one of its credit card customers in the collection process in a Citibank office in March 2011.

BCA’s senior credit card general manager, Santoso, commented that while BCA is not too worried about Citibank’s return, the bank is expecting a dip in the bank’s profits due to another BI regulation.

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The regulation, issued by BI last month, threatens to revoke the licenses of credit card issuers that charge interest rates above the new limit. It is currently set at 2.95% for Visa and Mastercard, and 2.75% for BCA private label.

 

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