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Card service tax will drive down Malaysia’s credit cards-in-force in 2019-2020The payments landscape of Malaysia will change over the next 12-24 months due to the re-introduction of card service tax effective September 2018
Lesson from the 2010 card service taxThe Government had imposed annual card service, effective January 2010,of $ 12 (50 MYR) for each principal credit card and $6.01 (25 MYR) for each supplementary card, in an effort to encourage prudent spending.
The 2010 card service tax regime had witnessed a severe drop in the country’s new credit card issuance and cards-in-force (CIF). These numbers rose again after the abolishment of the card tax levy in 2015.
New cards issuanceFrom more than 2 million cards per annum, the volume of new cards issuance had dropped to circa 1.2 million new cards issued per annum between 2009 and 2011.
The 2010 new cards issuance volume had dropped by a whopping 44% vs.2009. When the service tax was abolished in 2015, the new cards issuance volume returned to the 2 million cards by 2017. The 2015 new cards issuance volume had increased by a whopping 46% vs. 2014 (1.81 million cards issued in 2015 vs 1.24 million cards in 2014).
Cards in force (CIF)In the case of the CIF, it had breached the 10 million mark in 2008 and 2009, before dropping to circa 8 million cards in 2010. The CIF has now returned back to 10 million cards level in July 2018.
Credit card limitDespite the significant drop in CIF between 2009 and 2010; from 10.8 million cards to 8.5 million cards (a drop of 21%), it was observed that the average credit limit per principal card had increased. What this alludes to is customers were cutting off their “excessive’ cards, rather than totally closing their credit card accounts with the issuers.
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http://www.theasianbanker.com/updates-and-...ce-in-2019-2020