ASSOFIN - CRIF DECISION SOLUTIONS GFK EURISKO CREDIT CARD SURVEY

Transcription

1 ASSOFIN - CRIF DECISION SOLUTIONS GFK EURISKO CREDIT CARD SURVEY September 2008

2 CONTENTS PRESENTATION OF THE SURVEY...pag. 1 EXECUTIVE SUMMARY... 3 Chapter 1 STATE AND EVOLUTION OF THE MARKET Analysis of the Italian market Analysis of infrastructures Chapter 2 REVOLVING CARDS Reference scenario Evolution of the market Chapter 3 SUPPLY General purpose cards Co-branded cards Pre-paid cards Business cards Premium cards Contactless cards Chapter 4 DEGREE OF MARKET RISK Level of territorial spread of charge cards Delinquency rates for charge card clients Degree of territorial spread of revolving cards Delinquency rates for revolving card clients Chapter 5 THE DEMAND FOR CREDIT CARDS: TRENDS AND EVOLUTION DYNAMICS An analysis of demand: sources The plastic card user base Evolution of credit and debit cards The current credit card market: card holders Card portfolio and credit card user behavior Internal market dynamics: the recent abandoning of cards (in the last 2 years) Profile of the recent abandoners Chapter 6 DIFFERENT TYPES OF CREDIT CARDS Different types of cards in financial decision-makers portfolios Premium cards: market share, features and card-holder profiles T&E cards: market share, features and card-holder profiles Revolving cards: market notoriety and ownership Fidelity cards: market share, features and card-holder profiles Pre-paid/re-chargeable cards: market share, features and card-holder profiles

3 Chapter 7 LOGIC OF APPROACH AND THE CREDIT CARD MARKET MAP A map of the credit card market Results of analysis Chapter 8 BRANDS AND RELATIONSHIP WITH THE MARKET The logic of brand positioning Trends in communication activity and brand notoriety Market brand image and customer satisfaction Credit card satisfaction: quotas and targets Chapter 9 THE CURRENT MARKET: OPPORTUNITIES FOR DEVELOPMENT Introduction Credit card affinity on the current market The current market: opportunities Current market risk factor Current market risk factor: analysis by type of credit card and use Chapter 10 POTENTIAL MARKET FOR THE CREDIT CARD Non-credit card holders: scale and characteristics Non-credit card holders: perception of the card and resistance Non-credit card holders: drivers for market access Non-credit card holders: targets The potential credit card user base The potential credit card user base: affinity and risk The potential market for the revolving card Chapter 11 PAYMENT CARDS ON THE EUROPEAN AND AMERICAN MARKET: EMERGING COUNTRIES AND CONSOLIDATED MARKETS Market trend Supply innovation Analysis of demand between the United States and Europe Credit card-holder profiles in the United Stated and Western Europe Comments on Western Europe Credit card-holder profile in Eastern Europe Comments on Eastern Europe APPENDIX Appendix Synoptic Analysis and Overall Map of Italian Society Appendix Map of the Financing Market and Styles of Household Financing Appendix Main types of credit cards Glossary

4 PRESENTATION OF THE SURVEY The 2008 edition of the Card Survey affirms the partnership between Assofin, Crif Decision Solutions and GfK Eurisko, who have once again combined their respective know-how and contributions in order to supply a distinctive product for the Italian market, that will be of real interest for all parties involved. The sixth edition of the Card Survey is a reference text for all leading figures in this sector: banks, specialized institutions, issuers, consultancy companies and institutional organizations. The function of the Card Survey can be summarized as follows: 1. To analyze market trends, by coherently collecting and organizing the numerous fragments of information on this market; 2. To offer reference scenarios and the developing trend of supply and demand for credit cards, using information and ad hoc analysis that would otherwise not be available on the Italian market; 3. To monitor initiatives in the sector, and to aim to capture the main trends and innovations as they happen. The 2008 edition continues to see a supply context that is increasingly competitive, in which the offer of new services is the main innovative marketing element. Once again this year, the Survey has a special section dedicated to the comprehensive supply of the Italian market. In terms of demand, the Survey continues to note that there is still a significant part of the population (non card-holders) who are reticent to use cards and who continue to prefer paying with cash for common expenses. The 2008 Survey will supply a detailed and specific analysis on this aspect, while trying to consider possible incentives and methods of intervention. As a demonstration of the Survey s constant attention to new initiatives and to the expanding market, the 2008 edition, like previous Surveys, will contain a chapter specifically dedicated to a subject of particular importance to the market. This edition contains an in-depth analysis on the emerging countries of Eastern Europe compared with the more consolidated Western markets. Therefore, once again this year, Assofin, Crif Decision Solutions and GfK Eurisko offer the Card Survey as a precious tool for specialized and non-specialized financial institutions to carry out an accurate analysis of the market, its targets, the business potential still to be developed and the most interesting, currently developing scenarios. ASSOFIN is an association that brings together and represents leading expert financial operators in the credit card and mortgage sector. 4

5 One of the activities that characterizes the association and qualifies it as a sector organization is the wealth of statistical information on trends in its areas of interest. CRIF DECISION SOLUTIONS is a CRIF group company specializing in designing, developing and managing solutions for risk control and for the financial market. CRIF DECISION SOLUTIONS has been the partner of leading financial operators for many years and has developed specific know-how in the credit card field, to recognize, gather and transform the main signals, developments, and market trends into business. GfK EURISKO is a leading Italian institute in the field of social and market research. Its approach focuses on research as a service to be performed with increasing specialization and an economic and cultural function aimed at supporting development within Italy. Company policy favors the added value of research data and their sociocultural organization. In 2005, the institute became part of the GfK Group, the 5th most important world research network, present in over 50 countries. Since 1987, GfK EURISKO FINANZA has been its department specializing in financial research, in order to meet the growing needs of financial marketing with exemplary professionalism. The integration of specific skills guarantees a complete analysis, which combines a quantitative vision of the market with a more qualitative vision of demand. The Survey is organized as follows: Chapters 1, 2 and 3 give a quantitative view of the Italian credit card market. Chapter 1 analyzes the market development of Italian payment cards, analyzing their growth trends. Chapter 2 specifically focuses on revolving cards, analyzing their market trend. Chapter 3 presents a censual analysis of the types of cards on the Italian market, enhanced by a precise description of each product s main features. Chapter 4 has an analysis of market risk, clearly distinguished for charge cards and revolving cards, which is the only one of its kind on the Italian card market. Chapters 5, 6, 7, 8, 9 and 10 focus on qualitative and evolutionary aspects of Italian credit card users (who they are, how much they spend and why they decide to use credit, etc.) together with indications on market potential. The analysis will allow us to follow evolutionary trends in demand and compare 2007 results with those of 2005 and The theme of Chapter 11 is an analysis of payment cards in the European and American markets, comparing the emerging countries of Eastern Europe with the consolidated Western markets. 5

6 EXECUTIVE SUMMARY The global credit card market is increasingly wide and diverse. This is a summary of the results of national and international analysis. The 2007 Italian market was characterized by the following: 3.5% growth in the number of transactions made with bank and post office payment methods other than cash; the process of replacement of checks continued (their use was reduced by 6%) with instruments that are more automated, such as payment cards (with a 6.1% increase) and electronic standing orders and payments (+3.8%); Substantial stability in the number of debit cards in circulation (+1.6% compared to 2006) in the face of a 7.1% increase in the number of transactions carried out on POS; A 10.3% increase in the number of credit cards in circulation; Growth of active credit cards ended 2007 with a 9.4% increase, recording a stable activity rate of 47%; The growth of active cards goes hand in hand with the growth of volumes transacted with credit card, which in 2007 increased by 8.3%; the number of transactions with credit card increased by 8.2%; The distribution of prepaid cards has increased notably: in 2007, there were 5.8 million prepaid instruments (+30% compared to the previous year); the growth in their use was even more significant at 49.6 million transactions in 2007, a 46% increase compared to the previous year. The customary in-depth study on revolving cards, predominantly issued by Specialized Financial Institutions, confirmed a dynamic that, after years of strong expansion, is stabilizing at more contained growth rates. This development is linked to the greater level of maturity of the revolving card market and reflects the less dynamic trend of the sector of household credit as a whole; it should be noted, however, that the growth rates recorded for revolving cards are still significantly higher. These are the most important trends: The number of revolving card transactions increased by 9.9% in 2007, and such growth was also confirmed in the first half of 2008; The revolving cards in circulation show a more restricted increase of 7.7%; such reduction is related to the decrease in new cards issued during 2007 (-11.6%); The level of activity of the cards in circulation was reduced from 35% to 33%, but there was an upturn in cards used (+3.4%); 6

7 Card-holders confirm their preference for option cards: 63% of transactions carried out in 2007 are, in fact, attributable to multi-function cards, compared to 37% use made with traditional revolving cards. The Survey offers a combined regional analysis of the level of spread and risk linked to credit cards, differentiated for charge cards and revolving cards. A study carried out on a large sample group of about 9 million cards shows that: One charge card out of three is issued in the North West; Lombardy is first, with growth compared to last year; Revolving cards record a regional distribution similar to the previous year: more than one card out of three is issued in the South and Islands, even if the region with the highest concentration of card is still Lombardy. In terms of risk, in May 2008, the delinquency rate for charge cards was essentially unchanged compared to last year. As for revolving cards, a comparison between 2007 and 2008 showed an increase of 1 percentage point. On the supply side there is some stability in the proposition of new products, while additional services linked to the use of cards are growing. From the product standpoint, this edition of the Survey also notes the development of prepaid cards, which are now part of the portfolio of all of the major banking and financial institutions. The Survey also detects the first signs of the presence of the contactless card, which is currently proposed through pilot projects both in Italy and abroad. As regards product diversification, we are seeing an increasing tendency to issue revolving cards or cards that also allows repayment in installments in addition to payment in full (option cards or cards with flexible repayment). The Survey has a large section dedicated to an analysis of both current and potential demand, in terms of characteristics, socio-economic profile, expectations, satisfaction, brand perception and relationship with the market. This analysis was primarily carried out by using trend data from the Multi-Financing Retail Market study on family financing behavior and is enriched with data from the Synoptic Analysis on individuals as well as information from Advertising Tracking Study MultifinTrack on financial communication (studies by GfK Eurisko). This year the analysis features further detail on demand, with a single-themed chapter on the international credit card market. Data in this new edition confirms the stability of the credit card owner base, whether individuals or heads of families. By concentrating the analysis on financial heads of families (a target that is always favored by supply for card positioning due to its high economic value and greater trustworthiness in terms of risk) it emerges that the stability of this owner base actually contains important elements of vitality and development; indeed, the share of holders of more than one card has actually increased. The new cards issued which are growing according to data from an analysis of supply are therefore placed for the most part with parties who are already owners of the instrument. The Survey also highlights an additional element of increased vitality in the use of the card, especially at the medium-high standing target, thus delineating a two-speed market. 7

8 The analysis of the different types of credit card T&E, Revolving and Premium - highlights the strengthening of the base of T&E card-holders and the dimensional stability of the user base of Premium card-holders, of known user bases and of aware ownership of the revolving card. With reference to this latter market segment, data confirms that the revolving card has now acquired good visibility and that, for a good portion of users, the features and logical use of the instrument are clearer than in the past. Noting how the different types of cards are positioned on the credit card market map, the elected area of added value cards premium, but also T&E - confirms the value card s trend towards more enterprising and elite market segments that make greater use of the card, thus offering increased business opportunities. The basic, rechargeable and revolving cards tend instead to position themselves more in areas that combine less economic availability with the pursuit of effectiveness. The 2008 data indicate a halt in the erosion of the customer satisfaction indicator and an improved image trend for all studied axes, but confirms the industry s difficulties to fully exploit its products on the market. This difficulty is particularly reflected at the selling stage in the inadequate transmission of the demand for additional credit card features: benefits/added services (insurance policies, customer loyalty schemes and discounts linked to cards). These are still less well-perceived and exploited, which hinders the proper placement of the product in terms of value for money both by the current and potential market. Given the fairly contained rate of distribution, the potential for expanding the current credit card holder base remains extremely encouraging. The potential credit card market may, however, vary in terms of size and characteristics of its components, in relation to the approach that players offering cards utilize: Broad logic considers its potential user base to be all current non-card-holders. This leads to a very large user base, even if a profile analysis shows that there is a high number of individuals with characteristics that may not be fully compatible with the product; A more focused logic takes into account not only the objective condition of current non-card-holders, but also the presence of some basic prerequisites for obtaining a credit card (that have emerged in the credit card market map). The potential user base is smaller, but offers very interesting characteristics for sector players. For those who choose to work with a more focused approach, the Survey continues to highlight the importance of a strategic reflection on the different positioning of various cards that are already part of a portfolio (mainly debit and credit cards) also bearing in mind the current strong overlaps in use, which indicate the market s lack of awareness on how to differentiate between these instruments. To this end, analysis seems to require a new adjustment on the part of credit card supply, with supplemented attention to how to build product innovation and how to transmit this innovation to the market in order to respond to needs shown by people/families, by carrying out education that is not pedantic, but is an answer to stimuli coming from demand. The theme of the monograph of this edition of the Survey is an analysis of the European and American markets, comparing emerging countries with consolidated markets. 8

9 The in-depth study provides analysis of the market in terms of the distribution and use of payment cards in the various countries, the main innovations of the products offered and analysis of demand. The market trend shows a scenario involving countries that are heavily advanced in card use (the United States and the United Kingdom), coupled with consolidated Western markets (North-West Europe) with lower levels of card penetration and habits in the use of the product that are different from the two countries mentioned above. These countries are followed by the countries of Eastern Europe that show strong development in payment cards but distribution of the product that is still limited. Two countries were also considered that are relevant due to their size: Turkey and Russia. Turkey is very advanced in terms of card use; Russia is still behind but has strong potential. The individual countries were analyzed on the basis of the distribution and use of payment cards. The data presented shows that the Eastern European countries, while their markets are still much reduced in terms of size, have growth potential both in the number of cards in circulation and their use; Estonia and Slovenia are distinguished because they have market features that are comparable to their Western neighbors. The North-West European structure is very diverse. In many cases, first and foremost Germany, the card is a widespread product but has room for growth in terms of use; Italy is located in the middle with average distribution and use data compared to the other European countries; Spain departs from these two countries with an upward trend of cards in circulation but can still grow significantly in terms of amounts used. Denmark and France show strong card use with low multi-card ownership. The Nordic countries stand out both in terms of ownership and use. The United States has a number of cards per inhabitant that is much higher than the rest of Europe; however, if we compare it with the other countries analyzed we note that the rate of card use is very similar to the Nordic countries and to the United Kingdom. The difference is in the product: while use in the Nordic countries is mostly through debit cards, in America it is almost exclusively through credit cards. The United Kingdom appears instead to be a market whose distribution is shared equally between debit card and credit card. In terms of product innovation, the contactless and prepaid cards are the main innovative instruments on the international market. The contactless card is an instrument that has been in the U.S. since 2005; in Turkey and Europe the first pilot projects date back to 2006 and as of today the market is still in the initial stages. Prepaid cards are a product with strong prospects for development; Bancoposta is currently the largest issuer of prepaid cards but we expect strong expansion of this product in the coming years throughout the entire European market, linked to cost drivers such as expansion in the public sector, in gifting and in the corporate sphere. On the demand side, the vastness of the regions potentially involved in the survey required a selection that would not result in a scattered analysis and would enable work on the basis of data that are comparable to each other by similar populations and methodologies. Data made available by the international GfK network was used. Opening up to international demand, in line with that shown in the analysis of supply, enables us to take a snapshot of the world of payment cards at three speeds: The United States represent the height of development with very high rates of distribution and effective use of credit cards; 9

10 Western Europe, which is undergoing diverse development of the credit card market, with countries such as the UK and France, where the dematerialization of money is now consolidated, countries such as Germany, where the credit card must face competition with other well-rooted payment and credit instruments, and countries such as Italy and Spain where, with due distinction, the distribution of plastic cards is still hampered by some cultural resistance; The Eastern European market (represented by the study of Estonia, Croatia, Slovakia, Latvia, Hungary, Lithuania, the Czech Republic, Macedonia, Russia, Serbia, Bulgaria and Poland), that, paradoxically, takes advantage of having a recent history of bancarization on the Western model; namely, of facing a market that has already overcome many developmental steps and that records a greater speed of growth and ease of access to banking instruments compared to continental Europe. The analysis of profiles of credit card holders in the various countries revealed a polarization between markets in which the card has undergone a development that is separate from the social status of card owners (US and UK) and scenarios that are less developed but have high potential, in which socio-cultural differences still significantly concern both the demand and supply of plastic cards (Continental Europe). In relation to Eastern Europe, the survey shows a high resemblance between the policy of placement of the card in Italy and in the countries of Eastern Europe. Indeed, in both cases, possession of the product is registered at the medium and high socio-cultural levels, mostly involving middle aged users with good financial reliability. 10