Asian consumers have quickly developed a taste for plastic. Unfortunately, however, the region’s high credit card growth rates have generated equally high default rates, prompting Asian lenders to beef up their credit risk practices. But so far, even in highly developed markets, most banks and their regulators have neglected a strategy that could do still more to help the credit card industry: the use of credit bureaus to share information about the borrowing histories of potential customers.

Credit cards are certainly popular in Asia (Exhibit 1): in all of its countries, usage is rising faster than GDP. In South Korea, for example, the relatively low value of high-denomination banknotes (the largest is only 10,000 won, or about $8), favorable tax laws, and regulations requiring merchants to accept credit cards pushed up card use by 90 percent a year from 1999 to 2001. But default rates too have risen: Hong Kong, for instance, had 28 times as many personal bankruptcies in 2002 as in 1998, the year before its bankruptcy laws were relaxed. In 2002, Hong Kong’s lenders wrote off nearly 13 percent of their total card receivables, compared with 7.5 percent for lenders in the United States. (In the...