CRIF DECISION SOLUTIONS - EURISKO CREDIT CARD SURVEY

Transcription

1 CRIF DECISION SOLUTIONS - EURISKO CREDIT CARD SURVEY September 2003

2 CONTENTS SURVEY INTRODUCTION...page 1 EXECUTIVE SUMMARY... 3 Chapter 1 MARKET CONTEXT AND EVOLUTION Reference scenarios International comparisons and development trends Debit cards Credit cards T&E cards Distribution network Use of payment cards Macro risk analysis Critical factors from a revenue and cost standpoint...29 Chapter 2 SUPPLY Bank-issued cards Top Class cards Non-bank-issued cards Co-branded cards Prepaid cards Cards and related services Distribution channels...47 Chapter 3 ANALYSIS OF DEMAND: INTRODUCTION Sources...51 Chapter 4 THE DEMAND FOR CREDIT CARDS Credit cards: evolution Credit card holders: evolution and card use Present credit card market: cardholders Characteristics and behaviour in the use of credit cards Premium cards: share, characteristics and user behaviour Premium cards: cardholder profile T&E cards: share, characteristics and user behaviour Carte T&E: cardholder profile...67

3 4.9 Revolving cards: popularity and distribution in the market Co-branded cards Fidelity cards Prepaid cards: popularity and distribution in the market Rechargeable prepaid cards: potential market...73 Chapter 5 BRANDS AND THEIR RELATIONSHIP WITH THE MARKET Market share Brand popularity: trend Brand awareness and advertising Competitive positioning of major brands Customer Satisfaction within the market: trend Satisfaction with cards: share and targets...83 Chapter 6 PRESENT MARKET: DEVELOPMENT OPPORTUNITIES Introduction Affinity for credit cards in the present market Affinity in the present market: according to type of card possessed and use Present market: opportunities Present market risk Present market risk: according to type of card possessed and use...96 Chapter 7 POTENTIAL CREDIT CARD MARKET Non-credit card holders: dimensions and characteristics Non-credit card holders: perception and reluctance towards cards Non-credit card holders: moving towards credit cards Non-credit card holders: targets Potential credit card user segments Potential credit card user segments: characteristics Potential credit card user segments: affinity and risk Potential credit card user segments: targets Revolving Cards: potential market Appendix Map of financial market and family financial management styles Appendix Synoptic table and map of Italian society...121

4 SURVEY INTRODUCTION The Crif Decision Solutions - Eurisko survey of the credit card market aims to provide financial players and credit card operators with a strategic and operational tool for analysing the credit card market, targets and business opportunities yet to be exploited. Our goal is to furnish as complete a picture as possible of this market by presenting information, data and trends relative both to supply and demand in an organised framework. The Survey is the result of collaboration between two specialised companies, Crif Decision Solutions and Eurisko leaders respectively in the sectors of decision-support systems and market surveys which have decided to pool their complementary resources and expertise to create a product providing a complete, multidimensional overview of the credit card business. Crif Decision Solutions is a Crif group company specialised in the development and management of risk control and financial marketing systems. Through years of working in partnership with major financial players, Crif Decision Solutions has developed specific know-how in the field of credit cards, enabling it to pick up and interpret the main signals, trends and market orientations and turn them into business opportunities. Eurisko, a leader in the field of social and market surveys, views research as a service to be provided at a growing level of specialisation and as an economic and cultural tool aimed at sustaining the country s development. The company s philosophy places a premium on adding value to research data and fitting them into a socio-cultural framework. The combination of these specific skills and expertise is a guarantee of a complete analysis, which integrates a quantitative appraisal of the market with a qualitative assessment of consumer demand. The Survey is organised as follows: chapters 1 and 2 provide a mainly quantitative view of the Italian credit card market; chapters 4, 5, 6 and 7 focus on the qualitative aspects relating to Italian credit card users (who they are, how much they spend, what motivations draw them to credit, etc.), completed by indications regarding the potential market. The analysis is enriched by the dimensions of risk and the affinity for credit cards, based on the experience of Crif Decision Solutions in the development of decision systems. As a result, the Survey not only provides precise insight into the specific characteristics of the present credit card market, but also identifies whole new scenarios and trends of primary interest, making this data available to financial players who can turn them into a valuable tool for analysing and developing the market, targets and business opportunities yet to be exploited. If sustained by the interest of operators within the sector, we hope this initiative may develop into a pool of information for market players, to be used as a starting point for planning future developments according to specifically formulated strategies.

5 EXECUTIVE SUMMARY Credit cards have gained increasing importance from the standpoint of both supply and demand, as tools for supporting the growth of a still developing business on the one hand and helping users to fulfil their life s aspirations and objectives on the other. In Italy, the use of payment instruments other than cash is below the European average. Cash/cheques are still used for 80% of payments, compared to a European average of 60%. The market s increasing propensity toward payment cards is however confirmed by the continual increases reported in this sector, which grew 8.8% in In particular, the growing ratio of active cards to the total number of cards issued is evidence that consumers feel increasingly comfortable with this tool. in 2002, for bank-issued cards - prevalently charge cards - the rate of use was 53% compared to 51.7% in 2001; for cards issued by institutions other than banks - prevalently revolving cards - the rate of use in 2002 was over 40% (versus 37% in 2001). In the past three years, the market has seen strong growth also in the distribution network, which has undergone expansion and consolidation. In 2002, the number of POS terminals increased by 9.4% and the number of ATMs by 9%, as a consequence of the promotional drive launched by banks and specialised financial institutions and the growing receptiveness of the retail industry to payments by credit card. In this respect Italy surpasses or is line with European averages. According to data released by Banca d Italia, the number of credit cards has risen to 21 million 757 thousand; according to Assofin estimates, which also take into account non-banking institutions, the number of revolving cards reached 5 million 865 thousand at the end of Many banking institutions are making their entry into the revolving card market, often through business units or ad hoc companies. In terms of geographical distribution, bank-issued cards tend to have a greater penetration in Lombardy and Lazio, whereas non-bank-issued cards show a noteworthy penetration in southern Italy, Sicily in particular. Furthermore, growth trends show that significant progress is being made by co-branded and prepaid cards, which are benefiting from new business opportunities and a potential for wider distribution. There is ample room for growth and increased card distribution in the sector of productlinked services; at present, cardholders are not very aware of these services, but market players are starting to use them as a valid tool for building loyalty and customising their portfolio. An analysis of the demand for credit cards confirms the growth rate enjoyed by this market in the recent past, with the entry of less elitist segments than those characterising the sector in the early 1990s. Despite this shift, the core of cardholders continues to be drawn from segments with a medium-high socio-cultural and economic profile and belonging to more innovative financial cultures. In particular, holders of high-value cards (Premium and T&E) typically belong to the segments with the highest standing (professionals, high incomes, large financial stocks); however it is worth highlighting the coexistence of targets characterised by a different financial approach and lifestyle, which thus opens the way for more precise, specifically tailored product targeting strategies: more

6 mature segments, where credit cards fit into the logic of prestige and recognition, but are not frequently used; and more dynamic segments looking for high-level products that are also functional and efficient, enabling them to be used for a whole range of purposes. The market positioning of revolving cards is different. These cards are most popular with the country s middle class and innovative and dynamic financial cultures, segments looking for tools to facilitate financial management. However, they are also adopted by users belonging to a lower socioeconomic segment, who needs concrete help in managing their families finances. An analysis of the relationship between brands and demand reveals the competitive turbulence that presently pervades this market, both as a result of the entry of new players - also international ones - and a strong advertising drive which, since 2002, has seen the major credit cards as protagonists in television spots with the big names (Visa, Mastercard and American Express) occupying the leading positions in terms of brand awareness. But competition in this market has only just begun and in our country it finds fertile ground for sizeable returns, favoured by the current positioning of brands, which consumers perceive to be basically alike. Here there are big opportunities for individual players to stand out from the crowd, in terms of service and product value, by undertaking initiatives aimed at boosting visibility and distinction within the market. The first steps toward expanding business in this market can also start from the current market, where important development opportunities lie in the segment of cardholders that presently shows the highest potential in terms of increased use, cross selling and up-selling. In this segment, characterised by a high customer affinity but current use below potential spending limits, we will see a real competition between brands and products in the near future. The prospects of an expansion in the current cardholder population are very encouraging: the potential credit card market may vary in terms of size and the characteristics of its components depending on the approach taken by players on the supply side: a broad approach, which considers the potential pool of users to include all those who do not currently hold cards: the dimensions are vast (66% of the entire market), but the overall profile reflects a high percentage of individuals with characteristics that are less in tune with the product; a more precisely targeted approach, which takes into account not only the objective condition of non-possession of the product, but also the presence, within the target population, of characteristics be they cultural and/or related to attitude (propensity, motivation to buy, value ascribed to the product) which may bring them closer to credit cards; in this case the potential pool diminishes in number, but embraces segments with medium-high profiles and economic potentialities that have until now remained on the margins of the credit card world. Each of the two starting targets meets different needs and strategies and it will thus be up to the individual players on the supply side to identify the target most consistent with their specific business goals. In particular, as regards the revolving card market which is gaining increasing visibility in our country we can see a potential target of large dimensions, in terms of percentage of families, and above all characterised by segments with a medium/medium-high socio-economic profile and financial curiosities stimulated by different drivers: on the one hand, the appeal of advanced tools for family financial management, on the other hand gratification of the desire to spend and realise one s dreams and aspirations.