Dubai credit card boom officially over

Published June 26th, 2012 - 11:33 GMT
Credit cards a-go-go
Credit cards a-go-go

Retailers and money exchange houses are expecting the number of prepaid card users to exceed credit card holders as people struggle to control personal debt following the financial crisis.

However, some banking analysts find this argument for prepaid cards invalid.

Majid Al Futtaim (MAF) Finance has seen a 95 per cent increase in the number of prepaid card users in the first half of 2012 compared to the same period last year, Rasool Hujair, chief executive of MAF Finance, said.

A new reloadable prepaid Visa card called Travelez was launched yesterday by Al Fardan Exchange in partnership with MAF Finance targeting corporate and leisure travellers.

They are aiming to attract 50,000 users by the end of the year, based on the footfall at Al Fardan Exchange outlets where clients must register for the card, Osama Hamza, general manager of the exchange, said.

Secure alternatives

“Our main clients were cash-dependent and now they’re looking for alternatives. Consumer demand is changing with technology changes such as the smartphone and ipad and they are looking for secure alternatives when shopping online,” Hamza said.

The high interest rates on credit cards, managing the budget, cash replacement and flexibility are the main reasons that consumers are considering prepaid cards over credit cards, especially the unbanked segment of the market, he said.

But some industry analysts say this argument is not sound.

“Credit cards let you spend before you pay. With prepaid cards, you are already paying, then using that money later. The popularity of credit cards would remain as is. Prepaid cards are a wallet, they store the money you already have. If you have no money to buy, you get a credit card. If you have cash, you go for prepaid. They won’t ever replace credit cards. The business of credit cards will not be lost,” Naveed Ahmad, senior financial analyst at Global Investment House in Kuwait, said. “Because of cash flow issues [following the economic crisis], people would rather go on credit.”

The Travelez card can be used at point of sale, ATM and online transactions in both US dollars and dirhams at 29 million retail outlets and 1.8 million ATMs worldwide, the event organisers said.

Standard, premium cards

It is issued in standard and premium cards with various benefits. Standard cards are valid for one year, have a maximum balance of Dh12,000 and users must submit a valid ID to register. Premium cards are valid for three years and have a maximum balance of Dh20,000.

Still, customers must pay fees to register, reload the card, transfer funds between cards, or withdraw cash from ATMs, Hamza said. Transaction fees if used abroad are Dh12 and Dh2 in the UAE, regardless of the size of the transaction.

Retailers will not pay a surcharge when the card is used at the outlets and customers do not require a bank account to sign up for a card, he added. In case the card is lost, customers can cancel them through a call centre or online.

The card is targeted at the unbanked segment, students, budget-conscious families, corporate travellers and young people using cards for online payments, Hamza said.

Travellers can buy their tickets online with the card but the exchange rates for travelling abroad depend on Visa rules, Hujair said.

MAF Finance is expecting 250,000 users to sign up for their prepaid cards this year, he said.

Limitations

The card’s limitations, however, mean that users can only load cash into the card via Al Fardan exchange outlets which is a problem when travelling abroad and running out of prepaid funds.

“In future, they will be able to debit their bank account to load the card online. We are also planning a multi-currency card,” Hamza said.


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