Singapore has a problem with credit cards. Specifically, it has a rising problem with bad credit card debt that has to be written off: $20.74 million as of March of this year, according to the country’s Monetary Authority.
While credit card debt constitutes a modest 2-3% of household debt in Singapore, a rise in non-repayment could indicate more significant economic issues to come - think 2008. If credit cards continue to go unpaid, banks will raise rates to compensate for the written-off debt; consumers will find their spending power cut, and the cost of their debt on the rise, which will combine to drive down spending.
Factor in that the launch of debt consolidation plans by the Association of Banks in Singapore in 2017 has failed to arrest the trend, and that Singaporeans hold nine million credit cards, and the situation is starting to look like the early stage of a financial crisis.
The EXUS view
Approaching debt collection agencies to manage the consumer debt portfolio is one thing, but the ideal solution for Singaporean banks and their customers is to prevent debt from growing in the first place. Pre-emptive actions that encourage customers to keep up their repayments will ensure that debt remains under control.
First, improvements in customer service and collection strategies can help avoid accounts being neglected. A Credit Solution Services (CSS) portal can address large numbers of customers at their convenience, remaining active 24/7, and making it as easy as possible for people to make repayments. Portals that allow customers to negotiate repayments without an intimidating phone call or awkwardly timed visit to the bank are a similar step toward convenience – and convenience encourages repayment.
Field collection is common across ASEAN countries, and affords a second opportunity to keep debt under control. Efficient - ideally automated - segmentation of debtors allows field collectors to concentrate on the clients who are most likely to pay, making the best use of their time in the field. Automation can also help at the scoring stage, taking the ultimate pre-emptive solution to delinquent loans by identifying potential delinquency at the start of the debt’s life cycle.
Whether Singaporean banks adopt these solutions may help determine whether they face a mini-crisis in the next half-decade.
Find out how banks across the globe are using debt-collection software to make dealing with arrears more efficient, with our EXUS case studies.