The U.S. Co-Branded Credit Card Market

Transcription

1 Brochure More information from The U.S. Co-Branded Credit Card Market Description: Packaged Facts' report provides in-depth analysis of co-branding, the credit card industry's most important trend of the last decade. Synthesizing analysis from many sources, the report offers well-founded insight into virtually all aspects of co-branding. The report estimates the total value of co-branded cards in circulation, discusses new product and marketing trends, and projects the future of co-branded card industry growth. The report also provides competitive analysis of the leading co-branded card issuers, as well as analysis of co-branded programs that fizzled or failed. Contents: I EXECUTIVE SUMMARY The Products Co-Branded Cards One of Six Basic Types of Plastic Payment Cards Co-Branded and Affinity Cards History of Affinity and Co-Branded Cards Early Co-Branded Cards Rapid Growth of Co-Branded Cards Comparison of Co-Branded and Affinity Cards Co-Branded Cards Often Segmented by Industry Many Private-Label Cards Convert to Co-Branded Programs Others Start Co-Branded Programs from Scratch Behind-the-Scenes Network Processes Card Transactions The Market Market to Near $874 Billion by 2002 Table 1-1: US Market for Co-Branded Credit Cards: Dollar Volume of Transactions, (dollars) Co-Branded Cards Responsible for Majority of Growth in General-Purpose Card Receivables Visa Leads in Co-Branded Cards Figure 1-1: Estimated Number of Co-Branded/Affinity Cards: Top Four Issuers, 1997 (number): Visa, MasterCard, American Express, Discover Factors Affecting Market Growth The Marketers Perhaps 100 Co-Branded Marketers Four Major Payment Card Brands Visa Is Largest Card Association Top 10 Issuers Generate More Than Half of Market Citibank Is Largest Co-Branded Card Issuer MBNA Thought of as Co-Branding King A Tough, Volatile Industry Ingredients for Success Mergers and Acquisitions Key Strategy for Acquiring Share Major Co-Brand Contracts Due for Re-Bidding The Consumer Data Presented for 11 Co-Branded Cards Nearly Three-Fourths of Adults Have/Use Credit Cards Credit Card Ownership Typical Among Adults Cardholders Present Modestly Upscale Profile

2 Scope and Methodology Scope of Report Report Methodology II THE PRODUCTS Definition of Terms Co-Branded Cards Are One of Six Basic Types of Plastic Payment Cards General-Purpose Cards Co-Branded and Affinity Cards Private-Label Cards Debit Cards Corporate Credit Cards and Purchasing Cards Stored-Value Cards Additional Products and Terms Charge Cards Credit Cards Bankcards Secured Cards Payment Systems MasterCard and Visa Payment Systems Issuing Banks Acquirers or Payment Processors Automated Clearinghouse and FedWire History of Co-Branded/Affinity Cards Early Credit Cards Were Single-Purpose Introduction of General-Purpose Charge Cards Introduction of General-Purpose Credit Cards Bankcard Growth History of Affinity and Co-Branded Cards Early Co-Branded Cards Rapid Growth of Co-Branded Cards Comparison of Co-Branded and Affinity Cards Table 2-1: Comparison of Affinity Cards and Co-Branded Cards (5 Factors) Co-Branded Cards Often Segmented by Industry Many Private-Label Cards Convert to Co-Branded Programs Others Start Co-Branded Programs from Scratch Co-Branding Benefits Three Constituencies Consumer Benefits Bank Benefits Co-Brander Benefits Overview of Payment Processing Behind-the-Scenes Network Processes Card Transactions Front-Office vs Back-Office Merchant Acquirers and Payment Processors Often Overlap One-Stop Shopping Still Not the Norm Payment Processing a Less Risky Means of Profiting from Plastic Mergers, Acquisitions, and Portfolio Sales Shape Competition Card Associations Respond Leading Merchant Acquirers Table 2-2: Ten Leading Merchant Acquirers: By Dollar Value of Transactions, January 1, 1997 Ten Leading Payment Processors Table 2-3: Ten Leading Payment Processors: By Total

3 Transactions, January 1, 1997 Trend Profile: First Data Corporation Company Active in Seven Business Areas, Five Related to Plastic Payment Cards Electronic Bill Presentment and Payment First Data Grows by Enhancing Customers' Businesses III THE MARKET Figure 3-1: US Market for Co-Branded Credit Cards: Estimated Dollar Volume of Transactions, (dollars) Market Size and Growth Market Nears $358 Billion in 1997 Table 3-1: US Market for Co-Branded Credit Cards: Estimated Dollar Volume of Transactions, (dollars) Co-Branded Cards Responsible for Majority of Growth in General-Purpose Card Receivables Table 3-2: Estimated Growth in General-Purpose Card Receivables, (dollars) Co-Branded Cards Constitute More Than 30% of Cards in Circulation Visa Leads in Co-Branded Cards Table 3-3: Estimated Number of Co-Branded/Affinity Cards: Top Four Issuers, 1997 (number): Visa, MasterCard, American Express, Discover Factors Affecting Market Growth Program Cancellations, Cutbacks Raise Questions About Co-Branding's Future But Adjustments to Be Expected Some Programs Killed by Own Success Citicorp Sees Profits in AT&T Card Nearly 40% of Cards Offer Rewards Market Outlook Positive Overall Economic Forecasts Remain Sunny High Level of Consumer Debt Peaks in 1996 Interest Rates Also Affect Card Use Industrywide Shift to Electronic Payments Shift to Direct Payments Will Change Banking Fees Cards Symbolize Relationships For Consumers, Cards Represent Buying Power Consumers Continue to Take On More Debt For Retailers, Credit Represents One-Half of Sales Volume For Card Issuers, Plastic Means Profits Plastic Increasingly Offers Benefits Consumers Want Various Market Segments Not Saturated Marketing Programs Affect Rate of Growth Home Shopping Methods Compel Credit Card Use Industry Consolidation Enables the Strong to Continue to Grow Legislation and Regulation Computer Modeling, Risk Assessment, and Market Segmentation Co-Branded Cards the Cream of the General-Purpose Crop Figure 3-2: US Market for Co-Branded Credit Cards: Projected Dollar Volume of Transactions, (dollars) Projected Market Growth Market to Reach $873 Billion by 2002 Table 3-4: US Market for Co-Branded Credit Cards: Projected Dollar Volume of Transactions, (dollars)

4 IV THE MARKETERS Marketer and Brand Share Perhaps 100 Co-Branded Marketers Four Major Payment Card Brands Visa Is Largest Card Association Table 4-1: Estimated Share of General-Purpose Consumer Card Market: By Marketer, (dollars): Visa, MasterCard, American Express, Discover Top 10 Issuers Generate More Than Half of Market Table 4-2: Top 10 Co-Branded Card Issuers and Estimated Market Share, 1997 (number and percent) Citibank Is Largest Co-Branded Card Issuer MBNA Often Thought of as Co-Branding King Household Credit Services Banc One and First USA Field More Than 1,000 Programs The Chase Manhattan Corp First Chicago NBD Corp NationsBank GE Capital Consumer Card Co PNC National Bank First National Bank of Omaha Other Leading Co-Branders Competitive Overview A Tough, Volatile Industry Ingredients for Success Competition Most Intense in General-Purpose/Co-Branded Consumer Credit Market Is Saturated Saturation Pushes Issuers to Develop New Markets Card Issuers Compete for Affluent Market Blurring of Lines Between Categories Mergers and Acquisitions a Key Strategy for Acquiring Share Four Companies Have Been Most Active Acquirers Smaller Issuers Find It Increasingly Difficult to Compete Globalization of Plastic Payment Card Industry Major Co-Brand Contracts Due for Re-Bidding Despite Consolidation, Bankruptcies, Competition, Most Issuers Survive Bank Issuers Face Competition from Specialty Shops Card Issuers Compete Against Other Forms of Payment Reward Cards Compete with Co-Branded Cards Mergers Reorder Ranking of Top 10 First-Place AT&T Rocks Co-Branding Industry by Calling It Quits Termination of Ford and AT&T Programs Spells Out Dangers in Co-Branded Cards Competitive Profile: Visa USA Visa the Largest Bankcard Association Strategy Is to Grow Market Rather Than Compete for Existing Share Visa Committed to Co-Branding as Growth Strategy Develops Co-Branding Programs with AOL, CompuServe, and Yahoo! Visa Battles American Express Over Ban on Competing Cards Visa and MasterCard Match Programs MasterCard Introduces World Card Visa Targets Upscale Market with Advertising for Premium Cards Visa Sponsors NFL and Olympics Visa Adopts "Read Me" Program for Holidays

5 Competitive Profile: MasterCard International Second-Largest Card Association and Co-Brander New CEO to Help Company Focus on Global Market Strategy Built on "Four Pillars" Committed to Co-Branding MasterCard Goes Platinum in 1997 Introduces World Card Switches Ad Agencies New Campaign Is "Priceless" Creative Credit Card Promotions MasterCard Sponsors Wide Range of Sporting Events MasterCard Breaks Rules on Co-Branded Corporate Card with British Airways Mondex and Smart Cards Competitive Profile: American Express In Third Place and Moving The Leader in Corporate/Purchasing Cards A Change in Philosophy Develops Co-Branded Credit Cards Changes to Become More Competitive Moves Aggressively to Challenge Visa and MasterCard American Express Courts Banks for Two Reasons Looking for Global Issuers American Express Also Challenges Banks on Use of "Platinum" American Express Strong in Financial/Travel Services Strikes Deal with Wright Express Aggressive Advertising AmEx Develops Sports Marketing Portfolio Seinfeld Commercials a Hit Competitive Profile: Morgan Stanley, Dean Witter, Discover & Co 109 The Largest Card Issuer by Accounts Fourth-Largest by Charge Volume; Third-Largest by Receivables Dean Witter Diversifies Card Offerings in 1994 New Cards Issued in 1996 and 1997 Merger with Morgan Stanley in 1997 Discover Is Committed to Co-Branding IGA Approaches Novus for Co-Branded Card Merger with Morgan Stanley Opens New Possibilities Competitive Profile: Citicorp Largest Credit Card Issuer and Co-Branded Card Issuer American Airlines and AT&T Are Now Citicorp's Flagship Co-Brands Decision to Terminate Ford Program Not Citicorp's Citicorp Launches New Co-Branded Card in 1997 Citibank Cards Generally No Fee, Competitive Interest Citicorp Offers Enhancement Packages Photo Card a Free Security Measure Second-Leading Issuer of Visa-Branded Corporate Cards Also Offers Private-Label Card Programs Processes Cards In-House But Sells Merchant Processing Business Citibank Targets College Students Keeps Tabs on Smart Cards Competitive Profile: MBNA Corp

6 MBNA America Is Second-Largest Card Issuer A Monoline "Specialty" Bank The Affinity King Professional Associations Are MBNA's Largest Group of Cardholders Cause-Related and Special-Interest Cards Educational Institutions and Educators Military and Law Enforcement Sports Affiliations Other Prominent Co-Brand Partners Place and Special Event Cards Cards for Other Banks Premium Cards for Brokerage Clients Jump Starts Subaru Co-Brand Going Global MBNA Scores with Platinum Plus Card Company Continues to Pursue New Accounts Getting the Right Customers The Ability to Say "Maybe" Technological Support for Mass Customization MBNA Diversifying Into Other Financial Services Competitive Profile: Household Credit Services The Third-Largest Co-Brander GM Its Largest and Most Successful Card Program Union Privilege Card Company Bullish on Co-Branded Cards Forays into Commercial Cards Growth Through Acquisition Operations in Canada and the United Kingdom Competitive Profile: Banc One/First USA, Inc A Fast-Growing Card Specialist Also One of Leading Co-Branders First USA Takes Over Management of Banc One's Card Programs, Gains Branch Distribution Network Introduces Many New Products Combination Credit/Calling Cards New Co-Branded Cards with TicketMaster, Honda Even a Card for Homebuyers Spins Off First USA Paymentech; Strikes Deal with First Data Competitive Profile: Chase Manhattan Corp The Fourth-Ranked Issuer Chase Operates Eight Co-Branding Programs Chase's Shell MasterCard Is Largest Gas Card Chase Offers Generic Flights Rewards and Retail Rewards Programs Chase Active in Commercial Card Market Chase Purchases Bank of New York's Credit Portfolio Competitive Profile: First Chicago NBD Corp Ninth-Largest Bank Is Sixth-Largest Co-Brander Opportunities for Co-Branded Corporate Cards NationsBank Seventh-Largest Co-Brand Issuer Dividend Miles Visa Co-Branded with USAir Southern Living Visa

7 Discontinues Program with Blockbuster Has Big Ambitions Sponsors US Olympic Committee GE Capital Consumer Card Co Eighth-Largest Co-Brander Four Co-Branded Programs Also Active in Commercial Cards PNC National Bank Ninth-Largest Co-Brander AAA Portfolio Acquisition a Major Coup Launches Multi-Branded Mall VIP Card Has National Ambitions Competitive Profile: AT&T Universal Card Services Corp One of Most Successful Co-Branders But Opts Out of the Business Marketing and New Product Trends Co-Branding/Affinity Marketing Remains Strong Airlines the Most Sought-After Co-Brand Partners Generic Frequent Flyer Programs for Issuers Without Partners Activation, Rather Than Acquisition, Is Increasingly the Focus Card Issuers Penalize Cardholders Who Pay Balances in Full Card Issuers Also Hike Late and Over-Limit Fees Yet Low Interest Rates Key to Revolving Balances Most Successful Awards Mesh with Customer Goals/Aspirations Multi-Branding a Strategy for Sharing Costs, Increasing Appeal Exclusive Items May Have Big Draw Card Issuers Offer Other Enhancement Products Many Card Issuers Cutting Back on Rewards and Perks Most Reward Incentive Cards Carry Annual Fees "Do-Good" Cards Help People Feel Good About Spending Affinity Card Issuers Test Political Waters Teaser Rates Still a Draw, But Harder to Find Platinum Cards Attempt to Recapture the Luster Lost by Gold Cards Supermarkets a Growing Target for Co-Branding Dillons and Bank IV Card Co Demonstrate Successful Co-Branding in Grocery Environment Yet Many Supermarket Cardholders Don't Carry Balances Secured Cards Avoid Alienating Customers Many Innovations Come from Private-Label Side "Pre-Selected" Says a Lot, Means Little Card Issuers Discover Billing Statement as Marketing Tool Consumer Advertising, Direct Mail, and Telemarketing Big Card Associations Spend $736 Million in 1996 Most Co-Branded Card Issuers Not Reflected in Estimate Television Advertising Dominates Card Association Advertising Visa Leads Over American Express, Discover, and MasterCard First Half of 1997 Shows Decline Direct Mail the Predominant Form of Advertising Direct Mail Is Cost-Effective Five Issuers Responsible for More Than One-Third of Solicitations Co-Branded/Affinity Offers Constitute 31% of Solicitations Premium Cards Account for Over Half of Direct-Mail Offers Mailings Increase to Non-Pre-Approved

8 Offers for MasterCard Are Up Telemarketing Another Popular Medium Internet Growing as Advertising Venue Card Marketing Included on Co-Brander's Site Consumer Advertising Positioning Rewards Are Key Theme of Co-Branding Touted Rewards Can Be Intangible Value Theme Sound Money Management Teaser Rates and Bill Consolidation Support for Worthy Causes Functionality Also a Theme V THE CONSUMER Ownership and Use of Credit Cards Note on Simmons Market Research Bureau Data Data Presented for 11 Co-Branded Cards Nearly Three-Fourths of Adults Have/Use Credit Cards Table 5-1: Consumer Ownership and Use of Co-Branded Credit Cards by Type, 1997 (number and percent): Any, Any Visa, Any MasterCard, Any AmEx -- Airline/Hotel, Automotive/Corporate, Affinity, AT&T Universal Credit Card Ownership Typical Among Adults Cardholders Present Modestly Upscale Profile Table 5-2a: Demographic Characteristics Favoring Ownership and Use of Credit Cards: Have/Use Any Credit Card vs Acquired Last 12 Months (US Adult Population) Table 5-2b: Demographic Characteristics Favoring Ownership and Use of Credit Cards: Used Last 30 Days vs Used Last 12 Months (US Adult Population) Americans Still Acquiring Cards Young People Well-Represented Among Ranks of New Cardholders Those Who Use Cards Present Older Profile Co-Branded Visa Cardholders Airline/Hotel Co-Branded Cardholders Older, Concentrated in West or Northeast Affinity Cardholders Have Youngest Profile Those Not Employed Indicated for AT&T Universal Visa Table 5-3a: Demographic Characteristics Favoring Ownership and Use of Co-Branded Credit Cards by Type: Airline/Hotel Visa vs Automotive/Corporate Visa (US Adult Population) Table 5-3b: Demographic Characteristics Favoring Ownership and Use of Co-Branded Credit Cards by Type: Affinity Visa vs AT&T Universal Visa (US Adult Population) Affinity MasterCard Holders Skew Younger Than Other Cardholders Table 5-4a: Demographic Characteristics Favoring Ownership and Use of Co-Branded Credit Cards by Type: Airline/Hotel MasterCard vs Automotive/Corporate MasterCard (US Adult Population) Table 5-4b: Demographic Characteristics Favoring Ownership and Use of Co-Branded Credit Cards by Type: Affinity MasterCard vs AT&T Universal MasterCard (US Adult Population) Asians Strongly Represented Among American Express Airline/Hotel and Affinity Cardholders Table 5-5a: Demographic Characteristics Favoring Ownership and Use of Co-Branded Credit Cards by Type: Airline/Hotel American Express vs Automotive/Corporate American Express (US Adult Population)

9 Table 5-5b: Demographic Characteristics Favoring Ownership and Use of Co-Branded Credit Cards by Type: Affinity American Express (US Adult Population) Majority of Cardholders Use Credit 6-19 Times/Month Singles Identified as Less Frequent Users Employed Males More Likely to Be Heavy Users Table 5-6a: Demographic Characteristics Favoring Use of Credit Cards by Frequency of Use: 1-5 Times Per Month vs 6-19 Times Per Month (US Adult Population) Table 5-6b: Demographic Characteristics Favoring Use of Credit Cards by Frequency of Use: 20 or More Times Per Month (US Adult Population) Only One-Third of Cardholders Pay Annual Fees Male College Graduates Indicative of Those Who Pay Their Balance in Full Each Month Table 5-7: Demographic Characteristics of Those Who Usually Pay Off Their Credit Card Balances Each Month by Type of Card: American Express, Visa, MasterCard (US Adult Population) Lower-Paying Occupations Indicative of Cardholders Who Make Partial Payments Table 5-8: Demographic Characteristics of Those Who Usually Make Partial Payment on Their Credit Card Balances Each Month by Type of Card: American Express, Visa, MasterCard (US Adult Population) More Downscale Profile for Those Who Make Minimum Payments Table 5-9: Demographic Characteristics of Those Who Usually Make Minimum Monthly Payments on Their Credit Card Balances by Type of Card: American Express, Visa, MasterCard (US Adult Population) Consumer Attitudes Analysts Identify Two Types of Cardholders Balance-Carrying Co-Branded Cardholders Older Cardholders May Be Less Profitable JD Power Survey Ranks Customer Satisfaction Aspects of Quality Important to Two Types of Cardholders Contrary to Popular Belief, Affinity Cardholders Do Pay Attention to Economics What About Young People? Yet Americans Accept Credit Cards as Positive Fact of Life APPENDIX I: EXAMPLES OF CONSUMER ADVERTISING AND PROMOTIONS APPENDIX II: ADDRESSES OF SELECTED MARKETERS Ordering: Order Online - Order by Fax - using the form below Order by Post - print the order form below and send to Research and Markets, Guinness Centre, Taylors Lane, Dublin 8, Ireland.

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