The reason for this growth, at first glance, is obvious: convenience and comfort. And, as strange as it sounds in relation to retail lending, this convenience is two-sided.
Why it is beneficial to banks
From the point of view of operating activities, it is unprofitable for banks to issue customers with small consumer loans (credit limit, not likely to be much higher 100 000 — 300 000 rubles, given the level of average wages in the vast majority of the Russian regions 30 000-40 000. To issue a credit card — much better, including for the purposes of operational management like credit risk (through flexibility of the credit limit on the card), and operational risk. Indeed, in this case the Bank has effective tools for monitoring and preventing suspicious transactions and transactions.
Another point — the competitive advantage. It is no secret that alternative to Bank loans for small amounts is the segment of microfinance institutions (“plan B” for potential borrowers). However, the level of interest rates on loans from MFIs is more on the level of the upper borders of the most “expensive” credit cards. Due to this banks are more than successfully compete with MFIs for clients.
What’s the benefit of customers
The current level of development of online services is striking: it is the segment where we see true technological breakthrough. To have a credit card is really very convenient.
There are many loyalty programs: a variety of cashback, affiliate and co-branding programs. A credit card can be a tool to decrease (by 2-3 percentage points, which is very significant in the loans for large amounts) interest rates for consumer credit as a second product, confirming the loyalty and credit discipline of the borrower.
Banks offer enhanced terms of the installment payment without interest (the”grace period”), there are options of cash withdrawal worldwide without a fee and interest, insurance for travellers and family members of the card holder.
Risks and threats
The main risk of a rapid spread of credit card debt load of the population. We continue to see, despite the announced control measures for discouraging high growth in retail lending in General (for all types of retail loans, in addition to the card segment), which already exceeded 30% since the beginning of the year. All this is happening against the background of weak dynamics of deposits of individuals in banks of the growth rate of savings of Russians from the beginning of the year is twice lower than the increase in their outstanding loans.
According to public statements on September 1, 2018, placed on the website of the Bank of Russia, the total volume of loans to natural persons amounted to 14.3 trillion roubles, 32% more than in the beginning of the year. Continuing the retail credit boom carries risks associated with the possible growth of spending on debt service on loans in an environment of falling real disposable income (minus 1% in August in annual terms), and in the case of increasing the load on interest rates. Now Russian debts relative to their incomes are at a level of 25%.