A ball rolling in your pocket: Russians have lost interest in credit cards

The stakes are high, but there is nothing to give

At the beginning of autumn, according to tradition, the interest of Russians in credit cards decreased. Due to the actions of the Central Bank, which raised the key rate and tightened regulation of the consumer lending market, credit card rates jumped by 10%. How much will credit plastic go up in price in the fourth quarter?

As Anton Sergunov, director of bank card development at Banki.ru, told MK, credit cards have a clearly defined seasonality. As a rule, this is associated with vacation seasons, long holidays, as well as periods of significant spending (the beginning of the summer season, getting children ready for school, New Year holidays, etc.). At the same time, the actions of the regulator also have an impact, but not as strong as, for example, in deposits. And this is connected, first of all, with the specifics of the product – banks can control the economics of the product not only with the loan rate, but also with other commissions, without worsening the conditions for the client. Credit card customers tend to be less responsive to changes in rates, which have risen by a market average of 10% over the past two months.

Currently, the range of credit card rates is in the range of 35–70%, depending on the type of transaction. As a rule, there is a higher rate for cash withdrawal transactions. But these changes do not greatly affect demand. For most clients, the determining factors when choosing a card are the duration, terms of the grace period of the loan, and fees for issuing and servicing the card. In addition, most clients apply for credit cards on more favorable terms in banks where they have accounts or debit cards on which they receive salaries. Often, banks themselves offer their clients to open credit cards with more attractive conditions and in a much simplified way.

At the beginning of the new business season in the Russian Federation, the traditional decline in interest in credit cards was superimposed by the Central Bank’s measures to cool consumer lending. Let us recall that from September 1, macroprudential premiums on consumer loans with a high total cost (more than 25%, which includes most card loans) issued to borrowers with a high debt burden (more than 50%) increased. And from October 1, the regulator tightened macroprudential limits for debt-ridden citizens.

Today, cards with an extended grace period and with varying lengths of the grace period are popular, reported Russian Standard Bank. The service of repaying debt on a credit card from another bank with an extended interest-free period for such an operation is also in demand. To develop loyalty programs, banks continue to diversify the categories for accruing cashback bonuses, offering partner promotions and promotions on goods with receipt scanning. The most attractive conditions are provided to new clients who apply for a credit card.

Credit plastic attracts citizens with its technology and ease of use. “Credit cards can be ordered online, there is no need to go to the bank to get them, they can be delivered directly to your home, so this opportunity is increasingly being used by borrowers of the younger generation, who, in general, are not supporters of offline lending,” noted NBKI Marketing Director Alexey Volkov. According to his estimates, in 2023, for the first time, citizens under 30 years of age became the largest age group in the structure of borrowers on issued credit cards: in January–August 2023, their share increased by 6%, to 29.5%.

At the same time, according to Sergunov, such a factor as the type of payment system, which was important for clients a year ago (the majority were interested in MIR cards after the departure of international systems from the Russian Federation), is not of interest today. Union Pay cards, issued by some banks, are in demand only among a small category of citizens planning independent trips abroad.

After Visa, MasterCard, AmEx left the Russian Federation, payment with these cards abroad became impossible. Only a few foreign retail chains accept cards of the national payment system “MIR” for payment. Fearing secondary sanctions, retailers are minimizing online transactions using cards issued by Russian banks.

However, cards of any payment systems issued by Russian banks work properly within the Russian Federation. No restrictions were introduced on the acceptance of these cards within the country. Many banks have significantly increased the share of MIR cards in their portfolios over the past 1.5 years. According to Sergunov, trade turnover using MIR cards has grown and exceeded 40% of the total volume of transactions in the Russian Federation. The share of cards from foreign payment systems continues to dwindle: banks are trying to re-issue cards based on their validity period to MIR cards, and new card products, as a rule, are all issued only on the national payment system. Nevertheless, taking into account the long-term hegemony in the Russian Federation, Visa and MasterCard cards still continue to dominate the market, their total share exceeds 50%. True, these cards no longer have anything to do with the companies Visa International and MasterCard inc (except for the logo), since the NSPK has long been responsible for the processing of these cards.

According to Finam Financial Group analyst Igor Dodonov, demand for credit products will decline due to rising rates, which will lead to a noticeable reduction in the issuance of credit cards in the fourth quarter. “The dynamics of rates on credit cards will repeat the dynamics of rates on consumer loans. I think that in the coming months they will be in the range of 30–35%,” the expert concluded.

Published in the newspaper “Moskovsky Komsomolets” No. 29142 dated October 24, 2023

Newspaper headline:
The cards didn’t work out