FE: There has been a notable rise in the use of credit cards in recent years. What is the share of your bank in such growth?
Md. Abed-Ur-Rahman: The rise in credit card usage is influenced by various factors, including the portfolio size and the number of cards issued by the bank. While our bank's share may not be as significant as larger banks, we have made a commendable contribution considering our size. Our focus remains on providing quality services and innovative products to our customers. Despite challenges such as regulatory changes impacting credit card issuance, we are committed to fostering the expansion of the credit card market in Bangladesh through strategic initiatives and targeted marketing efforts. Elaborating on our strategic initiatives, we have implemented various measures to incentivise credit card usage and alleviate concerns associated with it. For instance, we have introduced a 2x rewards point system for every Tk. 50 spent, allowing cardholders to earn more rewards while saving on purchases. Additionally, to promote the widespread adoption of credit cards, we are focused on eliminating hidden costs and addressing any apprehensions regarding financial burdens.
Furthermore, we offer annual fee waivers to cardholders who conduct a minimum of 15 transactions of any amount within a specified period. Moreover, we streamline the credit card issuance process by integrating it with term loan sanctioning procedures. To facilitate convenient repayment, we have expanded our payment channels by allowing agent points for depositing credit card payments. Additionally, we proudly offer secured credit cards with a low-interest rate of 14 per cent, catering to individuals without established creditworthiness, those averse to traditional credit options, or students aged 18 and above.
To continuously provide quality banking service with enhanced customer focus, we are innovating a wide variety of need-based products with widely popular solutions. We are committed to being the first choice of our customers as a distinct financial service provider. We continuously enhance our mobile application, Midland Online, to meet the evolving needs of our customers. In the near future, valued customers will have the opportunity to apply for digital secured credit cards directly through Midland Online. This feature will enable customers to pledge their Fixed Deposit Receipts (FDRs) or other securities for card issuance, further enhancing accessibility and convenience. Through midland online, customers can also block or unblock their cards and place card reissue requests, making it a robust and popular application.
FE: The use of credit cards is primarily Dhaka-centric. Do you have any special plan to popularise those in other urban centres?
Md. Abed-Ur-Rahman: Yes, we are committed to expanding our credit card services beyond Dhaka to other urban centers, as well as rural areas covered by our branch network. Our strategic plan involves enhancing the digital experience for credit card applications, allowing clients to apply from the comfort of their homes. We've also enlisted club members from various urban cities to promote our cards effectively.
Additionally, we're integrating the broader application process with our website and upcoming Nano Loan initiative. Clients can conveniently submit all required documents online, and eligible applicants will receive their credit cards after undergoing necessary credit approval. Our focus is on demographic targeting, catering to different segments such as intern doctors, professionals, government officials, business owners having good credit rating/ credit worthiness and club members.
Through our digital expansion efforts, we aim to provide faster and smoother services nationwide, contributing to the country's overall development.
FE: Does the investment made by banks in credit card facilities ensure justified return?
Md. Abed-Ur-Rahman: Thank you for asking such an insightful question, particularly using the term 'justified return' instead of 'profit'. Primarily, one might perceive the credit card business as yielding high returns due to the relatively higher interest rates. If we look at our bank's vision, we provide 'fund transfer' facilities with very low charges to facilitate instant cash access. Additionally, we offer free 'add money' services for the convenience of our valued customers. When we compare these components, it becomes clear that we prioritize providing affordable solutions. While customers pay interest on their transactions, they also benefit from complimentary or low-cost services, ensuring that our returns are not only profitable but also justified.
FE: What is the average default rate by the credit card holders?
Md. Abed-Ur-Rahman: Managing a healthy and robust credit portfolio is our top priority. Considering the dynamic nature of consumer behaviour, fluctuations in default rates are inevitable. However, with our strong credit risk management and dedicated recovery unit, we ensure sustainable financing. In broader terms, the default rate remains under control.
FE: Most shops and business establishments do not accept credit and debit cards. What should be done to motivate them?
Md. Abed-Ur-Rahman: Encouraging shops and business establishments to embrace credit and debit card payments requires a multifaceted approach. Firstly, fostering a digital payment mindset is crucial. Initiatives like the Smart Bangladesh and cashless society campaign, which includes programs such as TakaPay and Bangla QR, are underway, supported by the government and the central bank. The introduction of the national debit card, TakaPay, by Honorable Prime Minister Sheikh Hasina last year signifies a significant step towards this transition.
Transitioning through point-of-sale (POS) systems reduces interchange fees (IRF), positively impacting the merchant service fee (MSF) paid by merchants. This, coupled with initiatives like Bangla QR and micro-merchant programs, creates a conducive environment for card payment acceptance.
In addition to these efforts, promoting cashless transactions through incentives such as discounts and tax benefits can further motivate businesses to adopt digital payments. Fintech companies and payment service providers can contribute by introducing innovative payment solutions, mobile wallets, and payment apps, making digital transactions more accessible and convenient for users.
Awareness campaigns and financial literacy programs are equally essential in educating consumers about the benefits and safety of digital payments. By addressing concerns regarding security and privacy, these initiatives help build trust and confidence in digital payment systems.
abed.rahman@midlandbankbd.net