(Yicai) Aug. 7 -- Driven by asset-quality risks, competition from fintech platforms, and regulatory pressure, China’s banks are downsizing their credit card operations in a pivot away from an aggressive decade-long expansion toward a more focused approach.

They have shut more than 40 regional credit card business centers since the beginning of the year, according to data from Wind Information. Bank of Communications closed over 10 in April, while China Minsheng Bank and China Guangfa Bank shuttered branches in south, center, and northeast of the country.

At the same time, the pace of co-branded card issuance is also slowing markedly. For example, Shanghai Pudong Development Bank stopped issuing 14 co-branded cards on May 12, while Bank of China will stop issuing 24 at the end of this month.

“The credit card business is facing a deterioration in asset quality, shrinking profit margins, and competition from internet-based credit payment services,” said Su Xiaorui, senior researcher at a Shanghai-based media and marketing research firm.

With the suspension of co-branded cards and the closure of regional centers, banks are trying to shake off the problems left over from an era of unfettered expansion by revamping their organizational structures and product mix, weeding out inefficient branches, and focusing operations on direct online sales, Su noted.

“The old model of driving growth through volume is no longer sustainable,” noted Dong Zheng, a veteran credit card analyst. “We’ve officially entered an era of competition over existing customers.” Resources are rapidly concentrating in major banks with robust risk controls and strong digital capabilities, putting smaller banks under greater pressure, he added.

“Competition in the credit card sector will no longer revolve around the number of cards issued, but around value per customer,” the head of a credit card division at one joint-stock bank told Yicai.

Banks are conducting real-time monitoring of credit risks through Big Data models and linking their credit card businesses with other retail services, such as savings, wealth management, and loans, to create comprehensive financial service ecosystems, the executive noted.

Meanwhile, regulators are tightening compliance requirements around the management of inactive cards, disclosure of installment interest rates, and consumer protection, forcing banks to enhance user experience while maintaining strict risk-control standards, the person said.

Digital and intelligent upgrades are driving banks to handle most traditional credit card services through mobile apps and to leverage Big Data models for better real-time credit-risk monitoring, he explained.

As competition intensifies and the market becomes more saturated, he suggested that lenders invest in their own competitive advantages to differentiate themselves and come out on top.

Editors: Tang Shihua, Futura Costaglione