Thailand’s credit card industry faces toughest challenge in 20 years
The credit card industry in Thailand is bracing for its most formidable challenge in two decades, a situation attributed to an anticipated weak economy next year, as highlighted by the Thai Bankers’ Association’s credit card club.
Atis Ruchirawat, chair of the club, emphasised that the unsecured loan sector, encompassing credit cards and personal loans, has already felt the tremors of a sluggish economy in 2024. He predicted that even more significant hurdles loom ahead, with the country’s economic performance expected to remain tepid and an uneven recovery that could stifle business expansion.
The Bank of Thailand is implementing debt assistance measures for credit cards, intending to soften the economic blow. These measures include a reduction in interest rates by 0.5 percentage points in the first half of 2025, followed by a further cut of 0.25 percentage points in the latter half of the year. However, these initiatives are anticipated to cap the industry’s income potential next year.
Adding to the industry’s woes, the central bank has decided to increase the minimum credit card payment from 5% to 8%, a move that has put pressure on cardholders’ repayment capabilities. This change has led to a rise in non-performing loans (NPLs) within this sector, said Atis.
“For both this year and next, the credit card industry is likely to experience the most significant challenges in two decades.”
Atis, who also heads Krungsri Consumer Group, a major entity in Thailand’s unsecured loan market, mentioned that Krungsri Consumer plans to focus on controlling asset quality next year. This focus is expected to affect loan approval rates.
Thailand economy
Currently, the approval rate for credit cards hovers around 40%, while personal loan approval rates vary between 20% and 30%, contingent on the customer’s risk profile, added Atis.
“Despite the sluggish economy, we remain optimistic about achieving positive growth in both the credit card and personal loan segments. On average, the growth rate is expected to exceed Thailand’s GDP growth by two to three times, although the actual performance of each business segment will depend on economic conditions.”
Krungsri Consumer forecasts Thailand’s GDP to grow by 3% in 2025 and aims for credit card spending growth to reach between 6% and 9%, alongside expansion in personal loans. The company is also striving to maintain stable NPL levels in 2025. Presently, Krungsri Consumer’s NPLs are at 1.3% for credit cards and 2.5% for personal loans, both figures being below the industry average.
Despite the slower economic growth, the company is on track to achieve its business objectives for this year. Krungsri Consumer anticipates issuing 600,000 new credit cards in 2024, marking a 7% increase year-on-year, with card spending expected to hit 393 billion baht (US$11.36 billion), an 8% rise, reported Bangkok Post.
For personal loans, the company plans to increase new loans to 96 billion baht (US$2.77 billion), reflecting a 5% growth, while boosting outstanding personal loans to 150 billion baht (US$4.33 billion), a modest 1% rise.
