Credit Card Transactions Decline on Weaker Growth Prices

CEIC Indonesia Data Talk - October 30, 2015 The growth in credit card transactions in Indonesia has slowed considerably since mid-2015 after a period of brisk usage for two years. The year-on-year rise in transaction value stood at just 6.8% during August 2015, compared to its prior double digit growth. This was mirrored in the weakening growth of credit card transaction volume (8.5% as at August 2015). This weaker growth of transactions stands out amid the government’s efforts to encourage non-cash transactions as a means of enhancing security and convenience. Monthly credit card transactions peaked at IDR24.7 trillion in July 2015 before falling to IDR23.0 trillion (comprising IDR22.4 trillion purchases and IDR700 billion cash withdrawals) in August 2015. This trend was mirrored by a similar decline in transaction volume during the period - falling to 23.1 million transactions, compared to 24.8 million transactions during the corresponding period. The statistics also show that average credit card transactions have been falling for three consecutive months since June 2015 to August 2015, to IDR993,331 from a peak of IDR1.04 million from October to December 2014. On the one hand, slower growth in credit card transactions disappoints proponents of cashless transactions as a means of increasing transaction efficiency and security. On the other hand, the moderating growth of credit card transactions comes as a relief to advocates of a more gradual increase in household credit facilities given the risks of excessive household borrowings leading to massive non-performing loans (NPLs). Indeed, the average NPL ratio has started rising again since early 2015 to a high of 1.70% during August 2015 from 1.37% as of December 2014. While year-on-year consumer loan growth has moderated to the 9.5%-12.0% range, the rising NPL ratio raises the possibility of additional macro-prudential policies to limit credit extension, which by implication would mean further reducing credit card transactions. However, the decline in credit card transactions may not necessarily imply the growth of cashless transactions will be stunted. Conversely, despite falling credit card transactions, transactions using ATMs and debit cards have continued to rise, particularly for purchase transactions. ATM and debit card purchase transaction value grew by 20.0% year-on-year during August 2015, and have been hovering around the 15% to 30% range since early 2014. The value of ATM and debit card transactions has remained fairly stable at around IDR1.1 million since mid-2009. This suggests that the decline in credit card transactions is more likely due to avoiding debt, rather than any infrastructural issues with credit facilities or preferred shift away from cashless transactions. Arguably, Indonesia’s weak economic growth, including its tepid retail sales numbers, have further served to reduce credit card transactions as households tighten their belt, reducing consumption and appetite for greater credit card debt. Year-on-year retail sales growth figures dipped below their double digit pace since July 2015, falling to 4.8% in July 2015 from 22.3% during the previous year (retail sales growth then inched higher to 6.0% during September 2015). Further proliferation of cashless transactions in Indonesia is likely to continue, both as Indonesia modernizes its commerce and as its growing middle class seeks greater convenience in transactions. While lower credit card growth may see some cyclical impact on the banking sector’s credit card business in the short term, on a wider scale this is unlikely to dent further growth in non-cash transactions. By Yudha Prawira - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
30th October 2015 Credit Card Transactions Decline on Weaker Growth Prices

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