HSBC, due to the sluggish Chinese economy making it difficult to profit, is reportedly planning to pull out of its credit card business in China.
According to sources familiar with the matter, HSBC has ceased issuing new cards and is working to reduce services provided to most customers in China.
Reportedly, following a failed attempt to sell the credit card business, HSBC is now planning to shut down the related operations. The plan is still under consideration, with a possibility of retaining a small portion of “high-end” clients to continue offering credit card services to them.
One source mentioned that “independent” credit card customers of the bank, those who do not use any other services of HSBC in China, will not be able to renew their cards upon expiration. This customer segment reportedly makes up a significant portion of the bank’s business in China.
The decision to withdraw highlights the challenges HSBC faces in China. Sources declined to disclose their identities as they were not authorized to speak to the media.
A company spokesperson informed Reuters that as part of its Premier and Global Private Banking services in China, HSBC will continue to offer credit card services with a focus on international travel, but did not provide detailed information.
Based on data released by HSBC, the London-based international financial institution generates most of its revenue from Asia and has made a significant bet on the Chinese market as other Western banks reduce their presence in the region. However, it now appears to be a burden for the banking giant.
In late 2016, HSBC launched credit card services in China with the aim to use it as a cornerstone for its Asian operations, further expanding retail banking and wealth management services in China.
Within 18 months of the service launch, the outstanding balance of HSBC’s credit card business reached $500 million. However, strict lockdown measures imposed by the Chinese government in response to COVID-19 led to stagnant growth and a sharp decline in transaction volume.
Subsequently, with the slowing economy, Chinese consumers have started tightening their budgets, further contracting the credit card market.
Insight & Info Consulting data indicates that HSBC saw a growth in card issuance for six consecutive years after entering the Chinese credit card market, reaching a peak of 800 million cards in 2021, which dropped to 767 million cards by 2023.
Nevertheless, sources mentioned that HSBC’s credit card business in China faces fierce competition and regulatory constraints that it has not encountered in other markets, such as pricing rules on interest rates and how banks handle default issues.
They further noted that these factors, along with high customer acquisition costs and fraudulent activities, have hindered the business outlook.
In addition to domestic banks in China, foreign banks like HSBC also face challenges from Chinese digital platforms that swiftly expand to provide loan services to consumers at lower costs.
The Greater China region, including Hong Kong and Taiwan, is the largest revenue source for the HSBC Group, but China is the only market where HSBC’s Wealth and Personal Banking business did not turn a profit globally.
In the first half of 2024, this business segment incurred a loss of $46 million, compared to a $90 million loss in the same period last year.
(This article references relevant reports by Reuters)