Credit cards users drop as alternate products capturing market

LAHORE   -  The number of credit cards maintained a low response from the banking consumers in the financial system due to the emergence of alterna­tive financial products being offered by fintech operators, mainly the product of ad­vanced salary to provide af­fordable cushion to consum­ers for meeting the essential and urgent financial needs.

According to the Payment Re­view released by the State Bank of Pakistan (SBP), the number of credit cards issued by banks decreased to 2.006 million by the end of December 2023 from the previous quarter, where it stood at 2.069 million. This decline occurred despite attractive incentives, discounts, and aggressive marketing.

It has been observed that the emergence of innovative and affordable products like ad­vanced salary has redirected customers particularly a spe­cific income group away from using credit cards to avoid paying high-interest rates. Out of 59.2 million payment cards, the share of credit cards stood at merely 3.4%, down from the 4% share reported in the previous quarter, according to the latest data available on the SBP’s website. Conversely, the adoption of advanced salary or Earned Wage Access (EWA) facility and has been increas­ing in major cities.

In the country, a few fintech operators provide financial products like advanced sal­ary through innovative and swift mobile applications or SMS. These operators charge a flat fee for the service and provide half of the salary to an employee through an arrange­ment with the employer. On the other hand, a few fintech operators also offer advanced salary loans against minimal interest rates directly to cus­tomers but they are less popu­lar than the EWA provider.

Analysts said that high in­flation in the country has ad­versely affected the purchasing power of the middle and lower-income groups, particularly the salaried class. Consequently, people are turning to innova­tive EWA services to address their financial requirements within limits without incurring high-interest rates. They fur­ther said a number of custom­ers applying for EWA services are increasing, with renowned conglomerates and multina­tional companies coming on board across the country.

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