Interview with Karen Karamyan, Head of Business-Banking Portfolio Management Department of "Ameriabank" CJSC
Tell us about the features of your new product, a line of credit with a business card?
Ameriabank offers customers an overdraft with a business card using three products: online automatic (up to 10 million AMD) or semi-automatic approved scoring loans (up to 20 million AMD), overdraft up to 50 million AMD to a secured account, POS-terminals or credit with financing turnover, as well as customs card credit lines in the amount of up to 20 million AMD. The business card can be used by both the head of the organization and the employees, for whom separate cards are issued, each with its own limit.
One of the main advantages of this type of loan is the availability of funds at any time, especially if you have unforeseen expenses or short-term financial difficulties. This is a good solution, especially for small and micro businesses, for which free cash and collateral issues are always relevant. Today more than ever, it's important that the entire lending process is essentially online. Ameriabank has always had a wide range of online services, and in the days of the epidemic, this was, one might say, a real salvation for us, which allowed us to work normally without any difficulties. Another advantage of an overdraft compared to a traditional loan is that the overdraft does not have a mandatory intended use condition. the customer may use it for any business purpose at its discretion. An overdraft is a very convenient tool for filling cash shortages, making loan repayments, and paying salaries, which is gaining great importance in the current situation. In order to mitigate the adverse economic impact of the epidemic, Ameriabank has offered its customers the opportunity to use a credit holiday. I should mention that only 43.4% of customers used this opportunity, while some preferred to solve financial issues through an overdraft. An overdraft with a business card allows you to track all expenses and manage them effectively, as well as simplify the accounting process.
One of the biggest advantages of a business card overdraft, in my opinion, is that it allows you to save time, speed up business processes and earn more profit.
Card credit products are not very popular in CIS and Transcaucasian countries. What do you think is the reason?
Traditionally, an unsecured loan product is considered to be very risky, which is why it is not popular. Additionally, an overdraft or line of credit does not have a fixed repayment schedule, which is also considered risky. However, when we analyzed our loan portfolio, we realized that the quality of card products is not inferior to ordinary loans, and sometimes even exceeds them. In any case, there is always a turnover in the account, interest is paid automatically, and there is no problem. I think banks will soon become active in this area, because card loans are more profitable and less time-consuming, their interest rate is higher, operating costs are less. Therefore, the situation will change, it is already changing. The volume of business card overdrafts has doubled in three years.
It's no secret that many entrepreneurs, especially micro businesses, use credit products for individuals, including credit cards. What is the advantage of a line of credit with a business card for an entrepreneur?
The business card loan interest rate is 2-3% lower than the similar loan interest rate for individuals. In addition, the RA government is developing a bill, according to which, in some cases, businesses are obliged to make exclusively independent payments, and for non-cash payments, you need to have a business card registered in the name of the company. So the choice is obvious.
Has isolation and the pandemic affected demand for credit card lines? If so, how?
Cashless circulation naturally increased during the pandemic. In the meantime, we did our best to minimize visits to the bank. Many companies began to require their partners to carry out transactions in a cashless way, which contributed to the growth of the demand for business cards. Customers who did not use overdraft before, or used it partially, started using all the features of this service during the epidemic. The demand for online services has increased significantly, and companies that previously developed the digital direction are now in an advantageous position. Ameriabank has constantly developed and continues to develop remote services, including Internet banking. Almost all of our services are available online. Ameriabank also joined the RA government's programs aimed at mitigating the negative economic consequences of the coronavirus, and all processes were carried out online. As a result, within the framework of the government's plans to neutralize the economic consequences of the coronavirus, 37% of the loans provided by RA banks fall to Ameriabank, because we were better prepared for the new reality.
Do you plan to further develop this product, and if so, how?
Of course we plan to. Our goal is to make business card lines of credit as affordable as possible for entrepreneurs. According to our studies, 95% of all loans with business cards are automatic and semi-automatic scoring loans, up to 20 million AMD. Therefore, we consistently work in two directions: improvement of scoring and business platform. We already have concrete solutions that we hope to announce soon.
Source: SME Banking Club