burgeoning consumer credit market has led to the development of
innovative cardholder and merchant loyalty programmes, which are
being implemented by the country’s major card industry players.
Titien Ahmad reports.

Thailand: Change in credit card spending and number of cardsThanks to the convergence of smart
card chip technology and the rising popularity of loyalty
programmes, Thailand’s Kasikornbank recently launched a merchant
promotion programme targeted at increasing customer spend at the
point of sale. The programme, Smart Shopping, rides on the bank’s
chip cards platform and European software developer Welcome’s
payment technology to allow merchants to run in-store rewards and
loyalty programmes.

This roll-out is part of the bank’s strategic shift towards
increasing transaction volume and card spending instead of
expanding the customer base through card issuance. The programme’s
key advantage is that it rewards cardholders for purchases
instantly at the point of sale – spending data is recorded in the
card’s smart chip. Kasikorn-bank expects the merchant promotion
programme to increase spending per card by 5 percent to 10

“We believe that innovative card products that encourage card spend
as real-time targeted merchant promotional offers will be an
interesting area,” said Anchalee Charasyosvuthichai, first
vice-president and head of the credit card product management and
marketing department for Kasikornbank, in an interview with

At the time of the launch, 39 retail brands and more than 300
outlets across Bangkok and the surrounding regions were
participating in the programme. The bank plans to substantially
grow the number of retail partners over the next few months.

Charasyosvuthichai believes that merchants will be supportive of
the programme as it is designed for shoppers who frequent a
particular merchant. In Thailand, it is not unusual to see multiple
terminals at a single point of sale, as a merchant may have
acquiring relationships with several banks. Each bank will offer
the lowest fee for processing its own card on its terminal and the
merchants thus resort to switching terminals for every bank’s card
in order to save on merchant fees.

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“I can see light in resolving the ‘price war’ in my acquiring
business. Moreover, the solution also supports a loyalty programme
for cardholders on the issuing business side. I’m proud that we are
the first bank to implement it in the Thai market,”
Charasyosvuthichai said. “Some merchants got the idea straight away
while some others were still unsure of how effective this programme
would be. But we are happy to say that nine out of ten merchants
perceive it positively. Instant marketing at the POS is the way we
convey the concept to the merchants.”

Kasikornbank, the third-largest bank in Thailand, has about 1
million credit cards in issuance and sees high growth potential in
the credit card business. Currently only 8 percent of transactions
are made through payment cards in Thailand, highlighting the low
penetration of electronic payment methods. However, the low level
of usage has not stopped Kasikornbank, and foreign lenders such as
Citibank, from making efforts to expand their market share in the
country, given that Thai consumers are benefiting from rising
incomes and increased awareness of the benefits of payment cards.
Nonetheless, there is a lingering concern over bad debts and rising
levels of card defaults.

Thailand’s central bank, the Bank of Thailand, has watched the
fierce competition in the credit card industry very closely and
household debt level is a frequent concern aired by its
policy-makers. Policies, such as raising the minimum income
eligibility for a credit card and limiting bank marketing
activities, are targeted at curbing card issuance, especially to
the mass market.

Perhaps in response to these regulatory initiatives, the local
manager of Visa International, Somboon Krobtheeranond, has
reportedly said that number of credit cards in Thailand was
expected to increase by only 4 percent to 5 percent in the third
quarter of 2006, and by 15 percent for the whole of 2006, which is
significantly lower than the past few years when growth has been at
least 20 percent.

Not all bad news

Despite this, there is some good news for card issuers in Thailand.
In late 2006, the Bank of Thailand decreed that the credit card
ceiling interest rate be raised from 18 percent to 20 percent.
Foreign banks have already raised the rates on their cards;
domestic banks expect to do it in 2007 once their billing systems
are adjusted.

The regulatory climate is another reason why Kasikornbank is
focusing on increasing the card spending of its existing
cardholders instead of issuing more cards. Charasyosvuthichai hopes
that the Smart Shopping programme will jolt her cardholders into
spending more and will strengthen consumer loyalty to the bank, at
a time when consumers are still coming to terms with the new
restrictions on consumer card lending.

The consumer confidence index hit a four-year low of 76.6 points in
April 2006 in the fourth month-on-month decline, and the protracted
political tension in Thailand has affected market sentiment.

Charasyosvuthichai said: “As the marketing message of the Smart
Shopping programme is focused on our loyalty programme for frequent
buyers, this obviously helps increasing repeat purchases at the
participating outlets. It may not reflect the ticket size yet but
does reflect total spending. And indirectly, Smart Shopping will
lead to higher share of wallet for the bank, helping it to become
the key operating account for the customer.”

Kasikornbank will be speaking at VRL’s Cards & Payments
Asia Pacific, March 20-21 2007, Hong Kong. For more details refer