Commentary: Tech solutions and loss sharing won’t be enough without vigilance against scams

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Work on this framework has been ongoing since early 2022 but announcement of more concrete details has been repeatedly postponed. This is because the inclusion of third parties as an undefined and ever-expanding class beyond banks and telcos (as the CPF incidents illustrate) is always going to be tricky. 

Should it also cover other similar institutions such as the Central Depository, mobile phone technology and social media platforms, dating sites, postal and courier services, or other parties whose shortcomings contribute to the leak of credentials?  

Or when it comes to CPF funds and savings accounts, predominantly meant as retirement savings and possibly the last safety net for a segment of society, should there be a case for special treatment? 

On Jul 4, the Ministry of Manpower said that insurance schemes were not part of the shared responsibility framework, hours after the Manpower Minister Tan See Leng suggested the government was considering insurance to protect CPF members.

One should note that the framework is expected to promote shared responsibility to avoid the moral hazard of users simply washing their hands off responsibility for their own actions. Internationally, this area is very much a work in progress. 

In the United Kingdom, the Contingent Reimbursement Model has operated in the last four years as a voluntary code adopted mainly by the big banks to reimburse scam victims. Historically, it has paid about 50 per cent of the reported losses. 

The United States is also studying this model while Australia is believed to be studying one similar to Singapore’s.

CYBER CRIMINALS DON’T STAND STILL

In the meantime, it is clear that cyber criminals are not standing still. They will continue to evolve, looking for new human weaknesses and technological vulnerabilities. 

In some reported cases, cyber scams have been linked to human trafficking by deceiving victims to travel to foreign locations; others have deployed deep fake voice and video technology to fool victims. 

Where scammers will strike tomorrow is anyone’s guess. Therefore, no single measure can be the panacea for this scourge.

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As Fed wraps up tightening, Chinese yuan breathes easier

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No government is probably happier that the US Federal Reserve is completing the most aggressive tightening cycle in decades than Xi Jinping’s.

Amid intensifying headwinds zooming China’s way, the idea of less monetary austerity in Washington – and fewer shocks in global capital markets – couldn’t arrive sooner. And odds are that Wednesday’s Fed interest-rate increase, the 11th in 17 months, is the last in the current campaign.

Yet there’s another reason the Fed taking a breather is comforting news for Xi: It relieves pressure on the yuan exchange rate.

As investors ratcheted down their expectations for China hitting 5% growth in recent weeks, the central bank found itself in a tug of war with currency speculators. Local media detailed how China’s major state-owned banks were dumping dollars for yuan in onshore and offshore markets to halt the renminbi’s slide.

This week, the plot thickened as top Community Party leaders meeting in Beijing pledged to keep a floor under the yuan exchange rate as part of vows to invigorate the capital market and buttress confidence.

“It’s interesting that the Politburo mentioned FX stability in the statement, for the first time in recent years,” analysts at HSBC observe in a note to clients. “This means that smoothing yuan depreciation pressure may become more of a policy priority from now on. This is in line with the People’s Bank of China’s further tightening of FX policy recently.”

On the dollar’s recent strength, strategists at RBC Capital Markets note that “the current rise has not been accompanied by as sharp a spike in volatility.” Thanks to nimble policymaking, they add, the yuan’s recent softness hasn’t turned “into an acute crisis situation.”

Beijing limiting the yuan’s downside is good news for four reasons.

One, it reduces default risks in the property market.

It’s not a given that Fed chairman Jerome Powell is done raising rates. As economist Seema Shah at Principal Asset Management puts it: “Data dependence remains the buzzword and, given the confusing signals of waning inflation but a tight labor market, keeping all options on the table seems to be a sensible approach” for the Fed.

Powell, after all, is keeping his options open after Wednesday’s move to raise the Fed’s benchmark rate to roughly 5.3% from 5.1%, the highest level since 2001. As Powell said on Wednesday, “it’s certainly possible that we will raise rates again at the September meeting. And I would also say it’s possible that we would choose to hold steady at that meeting.”

Longtime Fed watcher Diane Swonk at KPMG speaks for many economists when she says Powell’s directive was “about as clear as mud.”

What is clear, though, is that the steady decline in US inflation over the past year – to 3% from 9% – means the Powell Fed will soon take a back seat on US economic policymaking.

As the Fed throttles back on austerity, monetary-policy currents among top economies will remain uniquely divergent for the rest of 2023. It means that the conditions that propelled the dollar to the highest in decades are being reversed just as China is struggling to support the yuan.

As downward pressure on the yuan recedes, so will concerns that “China Evergrande” will be trending on global search engines. The weaker the yuan gets, the greater the risk property-development giants might default on dollar-denominated debt.

Quieter conditions in Chinese credit markets will make it easier for Xi’s reform team to end boom/bust cycles in the real-estate sector.

Two, it reduces the risk of an Asia-wide race to the bottom on exchange rates.

In recent months, many Asian policymakers worried the yen’s 7% drop this year would prod Beijing to follow suit. Nothing, after all, might ensure China reaches this year’s 5% GDP growth target faster than a sharp drop on the yuan.

That would set the stage for a region-wise response. Given still-lingering trauma from the late 1990s, fears that Tokyo’s beggar-thy-neighbor strategy might provoke responses from China to South Korea to Southeast Asia has been a major fear of US Treasury officials.

Back in the ’90s, the Fed’s aggressive rate increases boosted the dollar to levels that forced officials in Bangkok, Jakarta and Seoul to abandon currency pegs. Those competitive devaluations set in motion the 1997-98 Asian financial crisis.

In the decades since, governments strengthened banking systems, increased transparency, created bigger and more vibrant private sectors and amassed sizable foreign-exchange reserves to shield economies from global shocks.

The Covid-19 crisis, though, demonstrated that Asia is still too reliant on exports for growth. Even so, Asian governments over the past year have been more inclined to prop up exchange rates to limit the risks of imported inflation.

As Xi and Premier Li Qiang resist the urge to engineer a weaker yuan, the global financial system has breathed something of a sigh of relief.

Three, a stable yuan could help reduce trade tensions. Surely, it has dawned on US Treasury Secretary Janet Yellen that Beijing is displaying restraint in currency levels as Tokyo does the opposite. That might have been the reason Yellen’s team left China off Washington’s latest “currency manipulator” lists.

Even if Prime Minister Fumio Kishida’s Japan is pushing the weak-yen envelope, Beijing needs to tread carefully. As President Joe Biden runs for re-election, Republican challengers – many itching to investigate China over Covid-19 and suspicious of Asia in general – are sure to accuse Beijing of unfair currency manipulation.

Sanctioning China is, after all, perhaps the only thing on which Biden’s Democrats and Republicans agree. Xi’s team surely realized that while Donald Trump’s trade war and unhinged rhetoric were a drag, Biden’s more targeted and consistent curbs on China Inc since January 2021 have landed some notable blows.

All the more reason to avoid new tensions just as Premier Li’s team pivots toward creating greater economic space for China’s private sector to thrive. Part of the problem is China’s own success in de-emphasizing the public sector over the last 20-plus years.

Sure, Xi’s regulatory clampdown on Big Tech since late 2020 stymied progress on increasing the role of – and innovation in – the private sector. But Beijing is being reminded the hard way that the public sector’s share of urban employment – roughly 20% – no longer packs the punch it once did. It means that, this time, Xi and Li need a more vibrant private sector to boost income and confidence on the way to faster GDP growth.

Here, the policy shifts on display in Beijing this month, coupled with a less draconian Fed, are a plus for private-sector development in Asia’s biggest economy.

“This latest rhetoric from the top man of China’s State Council is likely to boost positive animal spirits in the short term at least,” says analyst Kelvin Wong at Oanda.

“From a medium-term perspective, the external environment also needs to be taken into consideration when global interest rates are likely to stay at a higher level for at least till the second half of 2024 given the latest hawkish monetary policy guidance from major developed countries’ central banks,” including the Fed.

Four, it suggests the shift to more productive growth is real. The latest signals coming out of Beijing are that Team Xi is more focused on long-term economic confidence than short-term-stimulus sugar highs.

The strategy “talks about boosting consumption but only indirectly, via supporting household incomes,” says Julian Evans-Pritchard, head of China economics at Capital Economics. “Those hoping for a new approach to stimulus involving greater transfers to households are likely to be disappointed.”

Economists at Barclays add that “while it signaled more support for the economy, the Politburo meeting generally fell short of offering large-scale stimulus. We view this as a signal that the government would stabilize growth around its target but refrain from an outsized policy response, given the top leaders’ intended shift in focus to quality.”

With a weak-yen obsession these last 25 years, Japan has amply proved that a weaker exchange rate may boost GDP, but does nothing to increase innovation, productivity or overall competitiveness.

If you are the CEO of a large or midsize company, why bother doing heavy lifting on restructuring, recalibrating, reimagining or reanimating innovative spirits when a weak exchange rate is bailing you out?

At the same time, internationalizing the yuan has arguably been Xi’s biggest reform victory these last 10 years.

In 2016, Xi’s government set the stage for yuan’s fast-increasing use in trade and finance when then-PBOC governor Zhou Xiaochuan secured a place for the yuan in the International Monetary Fund’s Special Drawing Rights program. It marked the yuan’s inclusion in the IMF’s club of reserve currencies, joining the dollar, euro, yen and pound.

Xi’s team has steadily increased and broadened the channels for foreign investors to access mainland China’s stock and bond markets. Chinese shares were added to the MSCI index, while government bonds were included in the FTSE Russell benchmark. That, and moves to increase financial transparency, increased global demand for the yuan.

Odds are good, says analyst Ming Ming at Citic Securities, that Xi’s government will continue to improve China’s capital-markets infrastructure to attract more long-term investment and boost direct financing.

Part of the process of building trust in the yuan is letting markets decide its value. The lack of full convertibility remains a big speed bump, of course. But so would the perception that Xi’s team and the PBOC are actively manipulating the yuan lower – provoking the Biden White House or the wider Group of Seven.

Beijing is focused on maintaining progress to date in internationalizing the yuan, and for good reason. That will get a bit earlier as the Fed ends a tightening cycle that Xi’s Communist Party will not miss.

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5 agencies team up to fight scams

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PUBLISHED : 27 Jul 2023 at 05:17

Five state agencies are joining forces to suppress illegal financial transactions and money laundering along the nation’s borders, deputy government spokeswoman Traisuree Taisaranakul said on Wednesday.

The five agencies are the Royal Thai Police (RTP), the Revenue Department, the Securities and Exchange Commission (SEC), the Anti-Money Laundering Office (Amlo) and the Bank of Thailand (BoT).

Ms Traisuree said the RTP reported on progress made in cooperation with the other agencies in carrying out the task under the policy of Prime Minister Prayut Chan-o-cha to suppress and prevent all forms of scams, including those made by call centre gangs and suppress transaction routes operating from border areas.

The agencies agreed the criminals are using illegal digital asset platforms to make peer-to-peer transactions while doing business and exchanging currencies along the nation’s borders. This channel can be used for money laundering and transferring money earned from illegal activities to foreign countries.

The RTP has been working with the agencies to set guidelines to suppress the illegal digital asset trade along the border and assigned tasks to each agency to combat such illegal activities.

Ms Traisuree said the RTP has created a database of digital asset business operators and currency exchange operators in the border areas. The database has proven useful in expanding the investigation and is accessible by Amlo as it moves to prosecute offenders under the Anti-Corruption Act, she said.

Amlo has checked suspicious transaction routes assigned by the RTP to find related bank accounts and digital assets to suppress or freeze money trails. It is also considering reviewing some laws so they can be more effectively enforced, she said.

Meanwhile, the Revenue Department has been checking tax payments made by business operators to see if they were using illegal digital asset platforms, for which the RTP database has proven useful. The BoT has okayed commercial banks to investigate and monitor any financial transactions to foreign countries originating from areas where illegal transactions are often detected.

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Pan Gongsheng: Can China’s new central bank boss fix its economy?

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Pan Gongsheng attends a press conference in Beijing, China.Getty Images
By Annabelle Liang & Nick Marsh
BBC News

China has named Pan Gongsheng as the new governor of its central bank, the People’s Bank of China (PBOC).

The 60-year-old’s appointment comes as the country continues to struggle with major economic challenges in the wake of the coronavirus pandemic.

Among the problems facing the world’s second largest economy are slowing growth, a housing market in crisis and youth unemployment at a record high.

Mr Pan succeeds Yi Gang, who held the top post at the PBOC since 2018.

Some analysts said the promotion of Mr Pan, who is not regarded as a close ally of President Xi Jinping, signals recognition by the government that it needs an experienced economist with a track record in crisis management to help steer the country through its economic problems.

The governor of the PBOC is one of the most prominent figures in China’s financial system.

However, compared to the leaders of many central banks in other large economies, the PBOC governor’s powers are limited as it is controlled by the ruling Communist Party.

The Chinese Communist Party reshuffled its leadership in October to help tackle the country’s post-pandemic economic challenges.

It became apparent that the ground was being laid for Mr Yi’s exit as governor when he was dropped from the party’s central committee and was nearing the official retirement age of 65 for high level officials.

However, Andy Chen, a senior analyst at consultancy Trivium China, said that at the time Mr Pan did not appear to be lined up as the PBOC’s next leader.

Mr Chen told the BBC the Chinese government seems to have recognised that it “doesn’t have a deep bench when it comes to well-trained financial technocrats”.

“Pan is known as a competent, skilled and outspoken technocrat, who is not going to hesitate to push policy proposals to the very top of China’s policy making apparatus during a crisis,” he added.

Pan Gongsheng meets US Treasury Secretary Janet Yellen in China on 7 July.

State Administration of Foreign Exchange

Mr Pan had been a deputy governor of PBOC since 2012. He was named in 2016 as Administrator of the State Administration of Foreign Exchange, to manage the country’s foreign reserves of around $3.2tn (£2.5tn).

Earlier this month, he was appointed as Communist Party chief of the central bank, which set him up to be its next governor.

Mr Pan received his doctorate in economics from the Renmin University of China in 1993.

After that he was a visiting scholar at Cambridge University, as well as studying at Harvard University’s Kennedy School of Government.

Back in China, Mr Pan made a name for himself with successful stints working for state-owned banks. He was also credited with helping to manage a currency crisis in 2016.

In his time at the central bank, Mr Pan has tightened rules around property speculation and warned of an impending housing bubble which is now hurting the Chinese economy.

His appointment to the top job at the PBOC is part of a broader reshuffle in China’s economic leadership.

In March, Li Hefeng, a long-time loyalist to President Xi Jinping was put in charge of China’s overall economic policy. At the time the appointment was seen as a reflection of President Xi’s desire to maintain a tight grip on the country’s economy.

So far China’s political leadership has been careful to play down the severity of the country’s economic challenges, and measures to stimulate the economy have been limited.

“Mr Pan has a reputation of regulation and compliance. He’s quite conscious about containing financial risks,” Dan Wang, chief economist at Hang Seng Bank China, told the BBC.

“I have no doubt that monetary policy will have a meaningful turn in the coming months. Maintaining economic stability is still key. We’ll see more expansionary monetary policy, but it won’t be very aggressive,” she said.

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Powerful Typhoon Doksuri lashes Philippines, threatens Taiwan, China

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MANILA: At least one person died as powerful Typhoon Doksuri lashed the coastline of the northern Philippines with gale-force winds and torrential rain on Wednesday (Jul 26), bursting banks of rivers and leaving thousands without electricity.

The rain bands of Doksuri pounded coastal communities, including isolated villages tucked away in tropical forests. Many people had already been pulled to safety ahead of the storm, which brought winds of up to 175kmh. 

“We are being battered here,” Manual Mamba, governor of the northern corn-growing Cagayan province, told Reuters.

The storm, labelled as a super typhoon by China’s Meteorological Administration, is nearly 900km across and is expected to sustain strength as it continues its course towards Taiwan and the Chinese mainland.

The agency has already raised its storm alert to the second-highest tier and the manufacturing hub of Guangdong province warned of the worst storm in a decade.

Throughout July, record temperatures have caused havoc across the globe, sparking wildfires in the US and Mediterranean. At the other extreme, scientists say global warming will also make storms wetter, windier and more violent.

In the Philippines, at least one person drowned in the province of Rizal so far, the national disaster agency said.

More than 4,000 passengers were stranded at ports across the country after sea travel was suspended, the Philippine coast guard said.

As of 8am local time, Taiwan’s Central Weather Bureau said in the past three hours the typhoon’s centre was close to hovering and at a standstill.

But China still expects its arrival early on Friday.

Doksuri would be second typhoon to make landfall in the Chinese mainland in less than two weeks after Talim slammed into Guangdong on Jul 17.

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China’s anti-Mario Draghi moment surprises markets

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For weeks now, global markets have ricocheted between excitement over a Chinese stimulus boom and disappointment that Beijing was taking its sweet time to jolt a slowing economy.

It’s now clear that Xi Jinping’s team has settled on a strategy somewhere in between. And for the global economy, the signals from this week’s meeting of the Politburo, the Communist Party’s top decision-making body, seem short-term negative for world markets – but long-term positive.

As Bill Bishop, long-time China-watcher and author of the Sinocism newsletter, sees it, the policy direction being telegraphed seems “fairly dovish,” but “doesn’t seem to signal much more significant stimulus incoming near-term.”

That’s bad news for bulls betting on a new Chinese stimulus bonanza that lifts markets from New York to Tokyo. Under the surface, though, there are myriad hints that the arrival of Premier Li Qiang in March is putting reforms on the front-burner once again. In other words, Beijing cares more about avoiding boom/bust cycles going forward than just mindlessly fueling a 2023 boom.

As “no fiscal expansion plans have been revealed so far, the impact will only be felt very progressively,” says economist Carlos Casanova at Union Bancaire Privée.

Economist Wei He at Gavekal Dragonomics added that “the Politburo’s meeting on the economy shows that officials recognize weak demand is an issue. But the meeting mainly called for ‘precise’ policy adjustments.” As such, it “remains far from certain whether those can deliver a near-term turnaround in growth. The conservative stance points to, at best, a stabilization or weak recovery” in the second half.

Instead of aggressive plans for massive monetary easing and fiscal pump priming — as markets had assumed — the chatter is about prudent policymaking with an emphasis on lower taxes and fees and incentivizing increased investment.

Rather than sharp drops in the yuan to boost exports, Li’s reform squad is focused on catalyzing greater scientific and technological innovation and giving the private sector more space to thrive and create new good-paying jobs.

In lieu of scores of top-down decrees or public jobs-creation schemes, the zeitgeist is that developing a thriving micro, small and medium-sized enterprises (MSME) sector is a more forceful way to address record youth unemployment than large-scale stimulus.

What Xi and Li are telegraphing might be best called the “anti-Mario Draghi” approach to enlivening Asia’s biggest economy.

Theno-ECB President Mario Draghi holds a news conference at the ECB headquarters in Frankfurt in 2018. Photo: Asia Times Files / Reuters / Ralph Orlowski
Italian Prime Minister Mario Draghi, shown here during his tenure as European Central Bank president in 2018, has resigned. Photo: Reuters / Ralph Orlowski

The reference here is to the former European Central Bank president’s infamous pledge “to do whatever it takes” to stabilize the financial system via powerful monetary easing.

A year later, Draghi’s liquidity onslaught inspired then Bank of Japan Governor Haruhiko Kuroda to follow suit.

Haruhiko Kuroda. Photo> Asia Times Files / JIJI Press

On Draghi’s watch, the ECB unleashed stimulus on a level that would’ve been unfathomable to Bundesbank officials of old. In Tokyo, between 2013 and 2018, the Kuroda BOJ’s balance sheet swelled to the point where it topped the size of Japan’s $5 trillion economy.

Neither monetary boom did much, if anything, to make the broader European or Japanese economies more competitive, productive or, broadly speaking, more prosperous. Instead, executive monetary support generated a bubble in complacency.

Draghinomics — and Kurodanomics — took the onus off government officials from Madrid to Seoul to loosen labor markets, reduce bureaucracy, incentivize innovation, tighten corporate governance or invest big in strengthening human capital.

China, it seems, is determined to go the other way. In the months since Xi started his third term — and Li arrived on the scene as his number two — Beijing has confounded the conventional wisdom on Chinese stimulus.

The start of this week’s Politburo is no exception. Markets were betting on major stimulus moves. Instead, China unveiled a 17-point plan to attract more private capital its way.

In a note to clients, analysts at Capital Economics said that “the absence of any major announcements of policy specifics does suggest a lack of urgency or that policymakers are struggling to come up with suitable measures to shore up growth.”

One possible interpretation was that Xi’s inner circle wants to put some actions on the scoreboard before next month’s annual huddle in the resort of Beidaihe to discuss long-term policy direction. Yet the tenor of steps seems more about supply-side reforms than fiscal and monetary pump-priming that might squander progress in reducing financial leverage.

Instead of talking about reaching this year’s 5% growth target, the government said the priority now is that “good foundation is laid for achieving the annual economic and social development targets.” Officials admitted, too, that “economic recovery will show a wavy pattern and there will be bumps during progress.”

In other words, the instant gross domestic product gratification that investors came to expect in Xi’s first two terms has been replaced with a more pragmatic approach. While there will be “prudent monetary policy” and at times an “active fiscal policy,” the bigger objective is to “extend, optimize, improve and enforce tax cuts and fee reductions.”

Stimulus will indeed emerge when, and where, needed. The Politburo said, for example, that it would “accelerate the issuance and use of local government special bonds.” 

This means it’s entirely possible that local governments may be allowed to “dig into” remaining special bond quotas, including from previous years, says economist Yu Xiangrong at Citigroup, who estimates the quota to be about 1.1 trillion yuan (US$154 billion).

But there was far more discussion of ways to “adapt to the major change in supply-demand relations in the property market,” and, in timely fashion, to “adjust and optimize real estate policies.” That, Beijing says, means steps to “increase construction and supply of low-income housing,” and “revitalize all types of idling properties.”

To economist Zhiwei Zhang at Pinpoint Asset Management, “this is an interesting signal as the property sector downturn is arguably the key challenge the economy faces now.” As such, “it seems the government has recognised the importance of policy change in this sector to stabilize the economy.”

Just as important, arguably, is the government saying it’s committed to “effectively prevent and resolve local debt risks, make a package of plans to resolve the debt.” The same goes for commitments to “concretely optimize private firms’ development environment” and “build and improve the routinized communication mechanism with companies.”

Furthermore, the party’s latest phraseology includes pledges to “firmly crack down on excess fee and fine charging, resolve the receivables governments owe to companies” and “accelerate the fostering and growing of strategic emerging industries.” The plan, the party notes, is to “strengthen financial regulation, steadily push for the reform and risk resolution at small and medium-sized financial institutions of high risks” as a means to “stabilize the basic market of foreign trade and investment.”

Such language is more the stuff of Adam Smith and Milton Friedman than Mao Zedong. More Hans Tietmeyer of Bundesbank fame than Draghi or Kuroda. One possible area of optimism is that Xi’s government is finally serious about fixing the underlying troubles in the property sector – not just treating the symptoms.

Casanova points to the Politburo’s statement that authorities would recalibrate property policies based on the “local property market situation” and consider developments related to “demand and supply imbalances.” To him, “that last point is new, suggesting a change in the macroprudential regime, as the government now sees a structural shift, requiring bottom-up measures to better reflect local conditions.”

That’s not to say Xi and Li won’t support demand where needed.

Chinese Premier Li Qiang and President Xi Jinping in March 2023. Photo: Xinhua

“We expect the government to roll out modest fiscal support in the second half of 2023, but no aggressive fiscal stimulus,” says economist Ning Zhang at UBS AG. Even so, Zhang says, “some policy room may be kept to support economic growth in 2024.”

Additional stimulus measures that Zhang expects Beijing to prioritize: an acceleration of special local government bond sales; a resumption of policy banks’ special infrastructure investment funds; Beijing providing credit to clear up local governments’ arrears to corporate suppliers; modest property policy easing and credit support for stalled property projects; a modest credit growth rebound; and perhaps a small official rate cut.

There also could be “some small-scale and targeted support” for selected consumption categories as well, Zhang says.

Mostly, though, the signals coming from Beijing this week suggest a greater emphasis in increasing confidence via reform and more vibrant safety nets than runaway stimulus. Bottom line, China’s Draghi days seem over – and that’s a good thing.

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Safety first in China under new central bank governor

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Pan, 60, was elevated to the central bank’s top political post this month. On Tuesday, he was confirmed as the replacement for respected governor Yi Gang, becoming the first person to take over both posts since Yi’s predecessor Zhou Xiaochuan. Pan played a key role in the restructuring and listingContinue Reading

Concert tickets, vacuum cleaners and more: Will credit card sign-up incentives help banks retain customers?

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Associate Professor Lewis Lim with the Nanyang Technological University’s (NTU) Nanyang Business School said banks have to create emotional attachment and cultivate “sustained loyalty” to a credit card brand. 

He cited the green American Express charge card, which was a status symbol in the 70s and 80s.

“These days, the credit card market is so cluttered and competitive that the game is more about acquiring new sign-ups and banks snatching customers from one another. 

“As a result, there is widespread brand-switching and very little true loyalty to any particular card. Consumers learn to play one card brand off against another just to extract the biggest benefit, and they will avoid paying the annual fees at all costs.” 

Banks that retain some cardholders beyond the first year may consider them loyal customers, but they may simply have forgotten to cancel their cards, said Assoc Prof Lim. 

“Any remaining loyal customers may also be upset by the bank’s tactics that favour new customers over existing customers, and they will eventually leave to become new customers of another bank’s card.” 

FREEBIES: A TACTIC WITH SHORT-TERM FOCUS

Concert tickets are not the only tactic used by banks to recruit new sign-ups. Citibank consistently rolls out new freebies and promotions for customers who sign up for credit cards. 

Over the past few years, new Citibank customers have received Nintendo Switches, iPads and various Dyson products when signing up for a credit card.

The bank said its customer sign-ups increase by more than 20 per cent when new promotions are announced. 

When asked about the attrition rate of these sign-ups, Citibank did not provide figures but said “most … remain active on their card after the first year, even after receiving the promotion items”.

Giving away freebies is a tactic with a short-term focus, and this works to encourage immediate action, said Dr Hannah Chang of the Singapore Management University. 

But sales promotion strategies are not designed for achieving longer-term objectives, unless new promotions are introduced repeatedly over time, she added. 

The perceived value of freebies holds “great significance”, and a free gift that is desirable and sought after can attract customers and encourage brand engagement, said Nanyang Business School’s Assistant Professor Charlene Chen.

While these strategies may increase initial customer acquisition, they are not sustainable in the long run, she added. 

Banks should also consider the long-term impact on customer retention, said Asst Prof Chen. For example, banks can offer loyalty points to customers, such as cashback rewards, once the card is activated. 

“Once they consume the initial benefit, they will be happy to continue using the card because it meets their needs and wants. Bottom line: Don’t just choose something popular, make sure it entices the right crowd you want.” 

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Beware of fake ads from scammers misusing PM Lee’s image to sell investment opportunities

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SINGAPORE: There has been an uptick in online advertisements misusing Singapore Prime Minister Lee Hsien Loong’s image to sell investment opportunities. Some ads also point to scam sites that impersonate CNA’s website and misuse CNA’s logo to add a veneer of legitimacy.

The fraudulent ads also entice people to click through to the scam sites using false claims that suggest Mr Lee is in trouble with the law or that he is “wanted”.

Some of these fake ads have appeared on the CNA website due to third-party ad providers.

Members of the public are advised not to respond to these ads or click on their links.

Mr Lee on Saturday (Jul 22) said in a Facebook post that scammers tend to capitalise on his image after a major speech or announcement that generated a lot of media coverage, and such crypto scams and fake ads “have popped up again in the past few days”.

“If the ad uses my image to sell you a product, asks you to invest in some scheme, or even uses my voice to tell you to send money, it’s not me,” he wrote in the post.

In fake ads that CNA has seen, various images of PM Lee have been used to point to scam sites with false headlines such as “SPECIAL REPORT: Lee Hsien Loong’s Latest Investment has the Government and Big Banks Terrified”.  

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