Credit card use back to pre-pandemic levels

Spending through credit cards reached the pre-pandemic levels in October in keeping with the economic recovery, a sign that clients are embracing the plastic money sidestepping the use of cash.

Total card loans held by lenders stood at Tk 1,381 crore in October, up 11 per cent from that a month earlier and 17 per cent year-on-year, showed Bangladesh Bank data.

The rise in transactions through credit cards, one of the major purchasing power indicators of clients, hints that economic activity in the country has been increasingly rebounding, said bank officials directly linked to card businesses.

Spending through credit cards drastically went down in the second quarter of 2020 because of the strict restrictions on movements imposed by the government to keep the deadly flu at bay.

In July, card transactions increased at a faster pace, because of either the easing of lockdowns or erosion of the purchasing capacity of consumers.

Credit cardholders subsequently made a record amount of transactions to the tune of Tk 1,552 crore in August during Eid-ul-Azha, one of the biggest festivals for Muslims. The figure, however, came down sharply in September.

But credit card-holders posted the second-highest amount in transactions in October, past August's figure and since December 2018.

Mashrur Arefin, managing director of City Bank, said the bank achieved their usual business from credit cards in the last two months, after a four-to-five-month hiatus due to the economic slowdown caused by the coronavirus pandemic.

City Bank is the top player in the country's credit card market. It has issued around 5 lakh cards. 

"We have almost gained the full profit from the business of credit card in recent periods. The domestic market has wholly turned around," Arefin said.

But the lender has yet to enjoy its business from the associated foreign part due to travel restrictions imposed by various nations since the beginning of the pandemic.

"The cross-border transactions have almost come to a halt. We are yet to manage our desired profits from that portion," Arefin said.

Mahiul Islam, head of retail banking at Brac Bank, echoed the same.

Brac Bank, one of the largest card-issuers in Bangladesh's banking sector, is also enjoying an upward trend in transactions through the digital tool.

"The bank has got a respite from the slowdown in the credit card business as transactions through the tool have been on the rise in recent periods," he said.

"Our credit card business has already reached the pre-pandemic levels," he said.

Clients now prefer credit cards compared to the pre-Covid-19 period as they are reluctant to visit shops in person in order avoid catching the deadly flu, said Ahsan Ullah Chowdhury, head of the card and digital banking at Eastern Bank Ltd. 

A good number of people have become habituated to using credit cards, giving a boost to the number of transactions as well, he said.

The number of transactions totalled 23.54 lakh in October in contrast to 21.19 lakh in September. The pandemic has given a great push to e-commerce, which has also had a positive impact on the card business, Chowdhury said.

He, however, said a good number of people who lost their jobs due to the business meltdown have largely depended on credit cards, playing a positive role in expanding the use of the digital tool.

The issuance of credit cards was on the increase in October when the outstanding number of banks' credit cards stood at 16.31 lakh whereas it was 16.19 lakh a month ago.

People have recently started using domestic airlines and travelling heavily, expanding the credit card business as a whole, said Syed Mohammad Kamal, MasterCard's country manager.

"We should promote credit cards in order to push digital payments. Both the government and the central bank should take policy measures to this end," he said.

The Bangladesh Association of Software and Information Services requested the central bank and the finance and ICT ministries in September and October respectively to provide 3 per cent subsidy to clients and 2 per cent to merchants on the use of cards.

"If the government accepts the offer, the country's digital payments will widen tremendously," Kamal said.

The subsidy should continue for a certain period such that people become habituated to the plastic money, he said.