“We’re open for business” – Nedbank to offer credit cards to low-income people

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Nedbank has reduced the minimum income required to obtain credit cards to 5,000 rand. She wants to increase her credit card market share to 16%.

  • Nedbank has reduced the minimum income required to obtain its credit cards.
  • The bank said it was “open for business and open to growth” of its loan portfolio.
  • Nedbank hopes its low requirements and monthly R40 fee will attract low-income people from its competitors.

Nedbank loosens its loan taps in hopes it can attract more consumers who had to rely on mashonisas (credit sharks) in the safety net of the formal credit market.

On Monday, the bank announced that it had reduced the minimum income required for consumers to get a credit card to 5,000 rand.

The bank said the move was aimed at boosting financial inclusion in South Africa, which is key to helping the economy recover from the blows of Covid-19.

His announcement also comes as credit bureaus report consumers are increasingly turning to consumer credit to supplement their incomes as their households’ financial health has yet to recover to their expectations.

“What we’re trying to do is access the pool of customers that would typically have been left out of extending credit. And they would typically have gone for the much more expensive short-term loans, as opposed to a product. transactional like a credit card, ”said Mpho Sadiki, Head of Trading Products and Solutions at Nedbank.

Although Sadiki does not have the exact percentage of Nedbank customers who will now be able to access a credit card for the first time, he said setting the minimum income requirement at R5,000 would help the majority of the population. active. This will help them avoid going to informal, unregulated lenders operating in the country who sometimes charge up to 50% per loan.

Market share game

While Nedbank is only lowering its minimum income requirement for credit card applications, Absa and Capitec have offered credit cards to people earning Rand 5,000 per month. The minimum wage required for a credit card application is R 5,000 and R 10,000 for independent Capitec clients. Absa Gold Credit Card requires a minimum income of R4,000.

Statistics Genesis News and Financials show that Nedbank held a 12% credit card market share in July in terms of its total portfolio of credit card debtors.

This was significantly behind the other four big peers FirstRand, Absa, Standard Bank, which had around 25% to 26% market share.

“We have always played an important role in the card issuing market. But this strategy of growing the credit card portfolio within this pocket of customers is one of many that we will use to really increase our share. market, ”Sadiki said.

Sadiki said Nedbank aims to increase its credit card market share to over 16% in the next cycle.

And obviously the bank has lent more than this year.

While at the group level, Nedbank sold fewer loans in the first half of 2021 than in the first half of 2020, all of this was entirely attributable to the bank’s corporate and investment banking division. Nedbank Retail and Business Banking increased its gross loans and advances by 7% in the first half of 2021.

Open for business

Sadiki said Nedbank had “huge” ambitions to increase its loan portfolio. The bank was encouraged by projections showing that the extension of credit to households will increase by around 3% this year and by around 5% in the next three-year cycle. This was aided by a better bad debt experience than what banks braced for in 2020 and the “cautious positive outlook” that the industry as a whole has embraced in terms of consumer credit performance.

“It’s always a difficult question to answer when the right time is to grow up,” Sadiki said.

He said that for Nedbank, the move was driven by data, the growth in transaction volumes it sees from its customers and customers of other banks as they slide on POS devices. the bank across the country.

“We feel that clients are in a better and healthier position than they were a few months ago. All the right indicators are saying it might be the right time, but obviously we are managing that growth. You don’t want to grow too fast, ”he added.

Sadiki said that while Nedbank saw an opportunity to expand its credit market to low-income people, accessibility testing will play a huge role in determining the success of its business in this space.

“Obviously, there’s always an object on one side and reality on the other. The reality is that as a responsible credit provider, you’re not going to over-strain consumers… It’s a balance. But we are projecting and seeing this credit extension grow, ”he said.

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