Monday, December 13, 2010
With today’s UAE household wielding a spending power of close to Dh20,000 a month, banks are exploring new customer channels and products with more flexibility and ease of use. Family cards are a prime example of this product innovation and are likely to become the next big thing in retail banking.
Paul Love, solutions consultant of ACI Worldwide, explains how this personal finance tools works.
What is a family card?
With family cards, individual family members — including extended family networks such as grandparents, household employee or day care providers — get their own credit, debit or pre-paid card with spending limits and user profiles set in advance by the primary account holder, such as a parent.
How does it work and where can customers use it?
Family cards can be used anywhere that the main account holder chooses and where they are accepted. Each one can be tailored to the specific requirements of the individual user. For example, a pre-paid card can be set up for teenagers to allow them to have access to a pre-set amount of funds. And the main account holder may choose to set limitations on where the funds can be spent such as in clothes stores, but not with online gambling sites. Debit cards can be set up for grandparents with limits on spending. Credit cards can be tailored for household employees with alerts going to the main account holder when they are used.
How big is the market in the UAE for this type of product?
The market in the UAE is significant. According to a survey by the UAE Ministry of Economy, the average monthly household income of UAE residents is Dh18,248,60 and expenditure is Dh11,241,20. The percentage of expenditure on housing and utility is 39.4 per cent of the total income, while expenditure on food and beverages is 14.2 per cent. The average size of a household in the country is 5.1, illustrating that there is plenty of scope for each household to hold more than one card.
Why do you think this would be a hit in the UAE?
Family values are a high priority in the UAE and the family unit is often extended to include grandparents and family staff — such as nurses for the elderly and nannies for children. But the main breadwinner may find managing their expenses for an extended family time consuming. With a set of family cards that can be tailored to the needs of each family member, they reduce the pressure to constantly control their outgoings. It also provides banks with an opportunity to tap into new streams of payments revenues. Instead of just one card associated with a bank account, many different cards can be.
Can the customer set a spending limit for each card?
The spending limit for each card is entirely set by the main account holder, within the credit limits set by the financial institution. So, a parent may decide that the card used by one of their children may only have access to a maximum of Dh1,000 each month. This helps the account holder manage their budgets while never leaving their child without cash in emergencies. The main account holder is the only person who can set or change the card limits or types.