FOREIGN banks coming in for the Association of Southeast Asian Nations (Asean) integration may face difficulty in penetrating the credit-card markets in the region, which are largely dominated by top local banks, Metrobank Card Corp. (MCC) President Riko Abdurrahman said.
Abdurrahman said foreign players can offer credit cards, but it is not going to be easy because they are latecomers.
“Look across the Asean countries today. Who dominates the credit-card business? In Indonesia it’s the local banks—Bank Mandiri, Bank Central Asia. Who dominates in Malaysia? It’s Maybank, CIMB. In Singapore you have DBS Group Holdings Ltd., United Overseas Bank Ltd., Oversea-Chinese Banking Corp. Ltd. In the Philippines it’s Metrobank, Banco de Oro Unibank and Bank of the Philippine Islands. We have seen that local banks are dominating the market, and it will stay,” he told the BusinessMirror.
Abdurrahman added that foreign banks eyeing tie-ups with local banks is one route that they can take.
“However, a lot of foreign banks, when they come in a new country, wanted to establish their own brand. If they tie up with a local bank, the local bank would want to use their brand,” he said.
The MCC, a subsidiary of Metrobank Group, is 60 percent owned by Metrobank and 40 percent owned by Australia New Zealand Bank.
Abdurrahman said about 10 to 20 years ago, foreign banks were successful in the credit-card business in the country. He added that new players need to set-up the infrastructure, as retail business, in general, cannot be run without system. They have to invest huge in technology, in distribution channels and people.
In a country with more than 100 million population, tapping the unbanked sector is a potential market for any banks. However, he maintained that it’s not easy, even though they have that aspirations.
Abdurrahman explained that the local banks have the distribution channel, having 700 to 900 branches nationwide, unlike foreign banks with only a few.
“Look at Hongkong and Shanghai Banking Corp., Standard Chartered and Citibank, compare them to big banks here. All the key ingredients to become successful in the credit-card business, such as technology, distribution and people, are what the local banks have.
“Foreign banks cannot compete in distribution channel. The glorious days of foreign banks in credit-card business are gone. If foreign banks that are coming in think they can dominate the credit-card business in a new country, then better think twice. Please come, but think twice,” he said.
Credit Card Association of the Philippines Executive Director and Spokesman Alex Ilagan welcomes the possible entry of large regional banks in Southeast Asia, which is expected to spur growth in the industry.
“These larger banks, with vast resources and bigger appetite to take more risks, will stimulate competition in the market. This is expected to result to new credit-card variants being introduced to penetrate finer segments in the market,” he said.
Ilagan said regional banks can leverage on their vast resources to gain a foothold in the credit-card market in the Philippines that can serve as their stepping stone in entering the consumer-banking sector.