Don’t you think we have to set up a memorial to the person who invented the credit system? It is so convenient – you don’t have to save money long years to buy a flat or a car. You just come to a bank, sign all the necessary documents and get a decent sum of cash in your pocket. The thing is that not all behave themselves correctly in such a situation, which finally results in legal procedures.
17% of consumers all over the world consider that they will get more favorable credit terms and thus reduce their spending costs. Russian people are twice as optimistic about this – 36% of the respondents find it possible to get a credit with more favorable conditions and to substantially save this way.
Does not this prove the fact that people all over the world without putting aside for a rainy day choose consumer-crediting terms more carefully? Whereas Russians all the same go for express credits under 70% interest rate and confess they need to be “kicked” by a crisis at the least to change the habit. Hard to understand, isn’t it?
HSBC is going to apply Experian-Scorex software
HSBC will use the system of business rules Strategy Management from Experian-Scorex, a world-known analytical business Experian department, to support credit-granting decisions all over the world.
Strategy Management is a multi-level program scoring system, which was finally chosen by HSBC after a careful examination and thorough research. The bank is going to apply the software within its international credit system to make the credit-granting decision process more clear and faster.
The major groups of complaints:
- Queues (, quality of personnel work (24%)
- Inconvenient working hours (24%)
- Difficulty to get through on the phone (22%)
- Confusing tariff scales and promotional booklets (16%)
36% of customers are ready to switch to another bank right now and the next 19% of the respondents will do this, if their banks do not change the service quality in the near future.
Prospects and positive expectations
According to the experts, VISA is leading on the Russian market of international payment systems (85% - turnover, 65% - issued cards amount). Second place takes Mastercard with 15% and 38% accordingly.
Some banks create ballyhoo around the credit cards market to promote new products and payment systems in Russia. They overestimate the scale and importance of the process describing the situation as “Russia experiences credit cards boom”, “credit cards have come into substantial use among Russian people”, “rapid growth rates”. However, such announcements are supported by the following figures:
By the end of the first quarter, 2005 the amount of cards issued by VISA reached 17 mln. (yearly growth 62%) and the total turnover of VISA cards exceeded $29 billion. At the same time Mastercard issued 9,7 mln. plastic cards. The growth was mainly due to the emission of credit cards - 169%, debit cards made up 76%.
The common share of the credit cards (both VISA and Mastercard) could be estimated 18,5% (nearly 5 mln. items).
According to the VISA International press service, Russia is leading in the emission volume, cards turnover and total number of transactions among the countries of the CEMEA region (Central and Eastern Europe except EU, Middle East, Africa - 84 countries in total). Some figures are even close to those of the European Union. The total cards turnover during January-March, 2005 made up 270 mln.USD (58,4% growth).
Oliver Hugh, Deputy Director of VISA International representative office in Russia and vice-president of VISA CEMEA, singled out the following stages of cards market development in the country:
1998-2002 - bank cards market development (debit card products)
2001-2004 - mass development of the market with the prevalence of salary projects
Starting from 2003 - retail crediting boom, from 2005 - credit cards market development
2006 - dynamic turnover growth.
Today we observe certain market saturation with consumer credits. The demands of people have changed - they wish to make use of the credit card conveniences while buying food, furniture, household appliances, petrol. As the research carried out by IMCA shows, Russian people are willing to spend 30% more money from their credit cards than from the debit ones.
The main types of consumer behavior
- Impulse credit (from $100 to $2000). Simplicity of registration and time are the major criteria for this group of people in choosing a creditor.
- Credit caused by circumstances and objective necessity (from $600 to $3000). Main criteria in choosing a bank: first installment rate, interest rate, monthly installment rates, repayment period. This group is the target one for promoting credit cards.
- Planned long-term credit from $3000-$10 000.
Mortgage is made on the security of real estate, mainly land, with the aim to get a loan, the so called mortgage credit. Mortgage also serves to describe funds, which one gets for mortgaged real estate, or mortgage credit debt.
Debtor-creditor relationship in the market economy acquires an absolutely different meaning in comparison to the analogous one existing in the command-administrative system. There appears a necessity to guarantee civil relationship stability. One of the most significant legal regulation instruments is the assets system, which secures fulfillment of the debtor’s obligations. Mortgage crediting in its turn is considered by the government to be a mechanism, which can solve issues of a great social importance within a given country: housing, capital construction financing, etc. For the period of 70 years mortgage had not been reflected in Russian Civil Law science. The legislation excluded the possibility to collect a penalty on the real estate. Only with passing the law on mortgage there appeared a legal mechanism which allows to use mortgage as an important institution securing creditor’s rights. Owing to this legislative act, the mortgage institution, which is the most effective security means for contract terms, started to regenerate. In accordance with the contemporary legislation the main mortgage function is motivating the debtor to fulfill his obligations as well as preventing or reducing the negative consequences of not fulfilling them.
Mortgage loan was not accepted in Russia for a long time, and that is why it is not widely used today in economical activities, though mortgage crediting seems to be the only possible option for the majority of the Russian people to solve the housing problem.
The Russian plastic card market is relatively new but has already displayed an impressive growth rate. According to the estimate of the Central Bank of Russia, 42,5 millions of plastic cards were issued before 1st July, 2005, which is 1,5 times more than in the previous year. The credit cards segment is relatively small (4,2% for the same date), but its growth rate is higher (82% with 50% - for debit cards). Experts forecast that it is plastic card crediting which is going to become the priority one for Russian banks and which will substitute consumer crediting. By the year 2008 the amount of credit cards can reach 15-20 mln, which is higher than the present figure. In November, 2005 IMA-Consulting Company carried out a complex credit card market research in Moscow.
A general description of the situation
For the time being our credit card market looks slightly chaotic. Strict requirements for the necessary documentation are compensated by low service charges and credit rates, and vice versa. It is difficult to say (predict), which trick will the indistinct bank criteria for getting a credit card play on the next applicant. However, the market is developing in the direction, forecasted by the financial analytics. In future we will observe the development of the two following credit card segments of the market:
- The segment with the high service cost and low requirements for the customers.
- The segment with the low cost for using a card and high requirements for the customers.
In general, though, banks aim to reduce requirements for the applicants: less paperwork - more clients. Banks offering unclear (not transparent) conditions will motivate customers to collect all the necessary documents by giving out bonuses and promoting preferential terms: the more convenient repayment period, bonuses for using cards, special conditions depending on the service character provided (e.g. getting the interest from the account balance), on the habits of the customer (discounts in the shopping malls, restaurants, drug stores, etc).
However, today the top issue is to establish the competent working procedure with the potential consumers. The effective communication with the customers secures the successful promotion of credit cards as a new product. The research shows that 28% of the citizens of Moscow complain about the current service quality in the banks.
Disposable payments lighten your purse at once when you getting mortgage lending and its simpler go though that kind of payment. But you should be very attentively according to any payments. Even not so large amount at first sight de facto can prove not to be inoffensively. Now let’s see, if you pay $300-$400 per 10 years and you pay “just” $60. What way is better. But anyway, you are to decide what way to choose… The main you must remember is that interest rates and monthly payments are two different things. I want to name the positions you payments consisted of:
There is some special situation you can get 1-2% on your side when you face them.
First, its different stocks during which you can not just economize once-and-for-all payments, but you can draw up a credit on beneficial conditions.
Second is personal regard. If you took credits and pay it back just in time, so bank don’t consider you as a men from the street… In some cases creditor can abate interest rate by 0, 5%.
Sometimes happens, when declared rate can be higher than rate.
There is another variant to economize as well. It’s better to take on credit at the bank where your company takes on credit.
There was a call from bank to me, and I was suggested to make an application for America Express. Straightly!!! Do they always deal that way?
I’m shocked… On the one hand they name a lot of terms they offered… How it should be interpreted?
It’s better to express conservatism according money questions. And always keep in your hand the terms of the suggestion. It’s better to ask to send all suggestions in written form, when someone called you about credits… As for me, I don’t trust anyone’s oral suggestions & etc…
Perhaps, I’m not right…