Global Retailer Cards: Co-Branded, Loyalty and Private Label Programs

Published by: Finaccord Ltd.

Published: Apr. 1, 2008 - 330 Pages

Table of Contents

0.0 EXECUTIVE SUMMARY

27.0% of major retail brands worldwide have introduced their own payment card program…

… with 15.3% of these organised through captive card issuing divisions or subsidiaries

Over 40% of cards are classifiable as private label or store cards with no international functionality.3

Five banking groups control over 30% of retailer card schemes identified on an exclusive basis

Several retailer-owned card issuers are active in the market on a multi-country basis

Loyalty cards with no payment function are most widespread in Asia and Latin America…

… and are most commonly issued by retailers in the books, music and videos sector

Over two thirds of loyalty cards are not offered in parallel to a retailer payment card program

Retailer payment cards are the most important affinity and co-branding segment for card issuers

Dynamics in the underlying retailing markets are also conducive to retailer payment card programs5

1.0 INTRODUCTION

Finaccord

Rationale

At the worldwide level, retailing is the most important co-branding arena for many card issuers

Methodology

Finaccord’s research covers 4,370 major retail brands across 60 countries worldwide…

Product definitions

2.0 GLOBAL OVERVIEW

Introduction

Retailer payment cards

Retailers in Taiwan, Brazil and Spain are most likely to have introduced their own payment card...14

Worldwide, over 15% of retailer payment card programs are managed by captive issuers

Over 60% of department stores worldwide have introduced their own co-branded or store card

Over 40% of retailer payment cards are not linked to an international payment network…

… and the strength of the main international card networks varies substantially by region

Five international banking groups account for over 30% of retailer card programs worldwide…

… with Grupo Santander having bolstered its presence as a result of acquisitions made in 2008...20

Several retailer-owned banks are also expanding on a multi-country basis

Retailer loyalty cards

In relative terms, loyalty cards with no payment function are most widespread in China and Chile..22

Retailers of books, music and videos display a high propensity to develop loyalty cards

Over two thirds of loyalty cards do not run in parallel to a fully-fledged retailer payment card

Captives and joint ventures

Captive finance arms can be of significant strategic interest to mainstream banking institutions…..27

… with over 200 retail brands worldwide reporting usage of captive or joint venture card issuers

3.0 ARGENTINA

Introduction

Retailer payment cards

The majority of retailer payment cards in Argentina can be classified as private label cards…

… with several retailers, including Carrefour and Falabella, using their own captive finance arms..34

Argentina’s payment card market has made strong progress since the 2002 economic crisis

Retailer loyalty cards

30 major retail brands in Argentina have introduced loyalty cards with no payment function

4.0 AUSTRALIA

Introduction

Retailer payment cards

Slightly over 20% of Australian retailers operate their own store or co-branded payment cards…...39

… with GE Money having established itself as the preferred partner of a majority of brands

The David Jones department store chain selects American Express for a new co-branded card

Retailer loyalty cards

FlyBuys, offered by Coles, is identifiable as the leading loyalty scheme in Australia

5.0 AUSTRIA

Introduction

Retailer payment cards

Few Austrian retailers have developed their own branded payment cards…

Retailer loyalty cards

… although almost one third have launched loyalty cards

6.0 BELGIUM

Introduction

Retailer payment cards

Cetelem is the dominant partner for payment cards among Belgian retailers…

… and a number of organisations offer debit cards linked to the customers’ bank accounts

Retailer loyalty cards

Over 40% of major retailers in Belgium have introduced loyalty cards

7.0 BRAZIL

Introduction

Retailer payment cards

C&A’s Banco IBI has built up a portfolio of around 20 million customers across Brazil

Cards carrying the Aura logo are accepted by over 30,000 merchants across Brazil

Brands within the Wal-Mart grouping are affiliated to Unibanco’s Hipercard multi-partner scheme..55

The store card sector continues to expand more quickly than the pay. card market as a whole

Retailer loyalty cards

8.0 BULGARIA

Introduction

Retailer payment cards

The first co-branded payment cards have begun to appear in the Bulgarian market…

Retailer loyalty cards

… albeit retailer loyalty cards with no payment function remain far more widespread

9.0 CANADA

Introduction

Retailer payment cards

A significant number of Canadian card issuers are involved in retailer payment card schemes…...64

… although several retailers issue cards through their own captive financial services arms…

… including the Loblaw grouping which has established President’s Choice Bank brand

Pre-paid cards are also commonly offered by retailers in a mature market for payment cards

Retailer loyalty cards

Many major Canadian retailers adhere to the AIR MILES multi-partner reward program…

… which claims to have built up a portfolio of more than nine million active accounts

10.0 CHILE

Introduction

Retailer payment cards

Retailer-owned card issuers dominate Chile’s payment card market…

… with around 8.8 million store cards having been issued by such banks…

… mainly to the low and middle income earners traditionally ignored by mainstream banks

Retailers and traditional banks are collaborating to circumvent problems linked to interoperability..71

Retailer loyalty cards

Almost a half of the retailers operating a loyalty card have not launched a parallel payment card

11.0 CHINA

Introduction

Retailer payment cards

Less than a quarter of major Chinese retailers have launched their own credit or debit card…

… although a substantial number have developed pre-paid cards

Retail sales have grown at an average rate of almost 15% during the last 20 years…

… with the involvement of foreign retailers having increased in the wake of market liberalisation

Foreign card issuers are playing a key role in China’s fast-growing credit card sector…

… undeterred by modest levels of profitability and the regulatory influence of the PBoC

A number of factors point to continuing growth in the Chinese credit card market

Retailer loyalty cards

Loyalty cards have been developed by the vast majority of major retailers in China…

… although it is uncertain whether many maximise the data mining and direct mailing potential

A variety of multi-retailer discount and loyalty schemes have been established in China…

… including the OK Card and SmartClub programs

12.0 COLOMBIA

Introduction

Retailer payment cards

Only two retailers adhere to an op. model other than a link with a single, external card issuer

GE Money returns to the Colombian consumer finance market by taking a stake in Colpatria

Retailer cards divide more or less evenly between co-branded and private label propositions…

… with high transaction fees having persuaded some retailers to develop their own store cards

Retailer loyalty cards

Loyalty cards with no payment function enjoy a relatively high rate of penetration in Colombia

13.0 CROATIA

Introduction

Retailer payment cards

American Express engineers a rare foray into the retailer card market by linking with Konzum

Retailer loyalty cards

Few retailers have established their own loyalty card programs…

… although many are linked to one or more of Croatia’s shop. centre or multi-retailer schemes

14.0 CZECH REPUBLIC

Introduction

Retailer payment cards

Only a handful of major Czech retailers have yet launched a store or co-branded card

Retailer loyalty cards

12 of the 15 loyalty card programs identified are unaccompanied by fully-fledged payment cards...95

15.0 DENMARK

Introduction

Retailer payment cards

The majority of retailer cards in Denmark do not carry an international payment logo

IKANO Finans lays claim to the greatest number of retailer partnerships for store cards

Retailer loyalty cards

The loyalty cards of several retailers have yet to be converted to fully-fledged payment cards

16.0 ECUADOR

Introduction

Retailer payment cards

The Supermercados La Favorita grouping offers cards managed by as many as six issuers

Retailer loyalty cards

17.0 FINLAND

Introduction

Retailer payment cards

In addition to the Plussa and Ykkösbonus schemes, a number of ret. cards are in evidence…

… with Handelsbanken, Ikano Rahoitus, OP Bank and Resurs Bank all present in this market

Nordea moves ahead by acquiring Stockmann’s payment card and cons. finance operations

The launch of the new co-branded Stockmann MasterCard will be the main initiative in 2008

Retailer loyalty cards

Esprit, Lindex, MODA and Seppälä have all set up their own autonomous loyalty schemes

18.0 FRANCE

Introduction

Retailer payment cards

Few retailer cards in France are linked to either the MasterCard or Visa networks

… although the change in co-branding rules towards the end of 2007 may alter the landscape...112

Joint venture issuers play a significant role in the French retailer card market

Banque Accord has developed a number of card partnerships outside of the Auchan Group

Finaref usurps Cofinoga as the financial services partner of the Go Sport chain

The Aurore card alone possesses around nine million customers in France

Retailer loyalty cards

Almost 50% of the major French retailers surveyed operate loyalty card programs

Groupe Laser, the immediate parent of Cofinoga, operates the S’Miles multi-partner scheme

Maximiles is France’s only web-based multi-retailer loyalty program…

… in an e-commerce market that is believed to be growing between 40% and 50% per annum..115

19.0 GERMANY

Introduction

Retailer payment cards

Just over 15% of large retailers in Germany have introduced their own payment card

Santander’s acquisition of Comfort Card makes it a leader for retailer cards in Germany

Commerzbank beefs up its co-branding portfolio by launching a card in association with eBay

Comparatively weak utilisation of credit cards in Germany necessitates a selective approach

Retailer loyalty cards

Over 40 retailers lacking a payment card do possess a loyalty card…

… albeit a number belong to either the HappyDigits or PAYBACK multi-partner schemes

The HappyDigits program has added several important partners since launch…

… and had accumulated 24 million cards by the middle of 2005

Most expenditure through the HappyDigits pay. card remains within the KarstadtQuelle Group...121

PAYBACK cardholders redeem around €6 million in bonus points each month

20.0 GREECE

Introduction

Retailer payment cards

Eurobank is currently a leader in the Greek store and co-branded retailer card market

… although Citibank enters the sector by launching the Affinity Visa card with Inditex Group

Retailer loyalty cards

A number of major retailers in Greece operate pure loyalty card programs

21.0 HONG KONG

Introduction

Retailer payment cards

Both Jusco and Wing On fund and manage retailer cards through captive entities

HSBC is the leading issuer of retailer cards in Hong Kong and is resp. for the Code Card…

… although it faces competition from the likes of Citibank and Standard Chartered

Retailer loyalty cards

… although the schemes of individual brands face tough competition from Octopus Rewards

22.0 HUNGARY

Introduction

Retailer payment cards

Three major retailers in Hungary have developed store cards in conj. with a pair of issuers

Only IKEA’s card, issued by Cetelem Bank, can be categorised as a private label program

Several card issuers are competing against Cetelem Bank for deals with Hungarian retailers

Retailer loyalty cards

A significant number of major retailers have introduced their own loyalty card programs…

… while others have elected to adhere to either the Multipont or Supershop schemes

23.0 INDIA

Introduction

Retailer payment cards

ICICI Bank has developed retailer payment cards in association with four major brands

Rising demand for credit cards should encourage the launch of further retailer payment cards…142

… and the increasing influence of major overseas rets. will also help to change the landscape...142

Retailer loyalty cards

Well over a third of major retailers in India have introduced their own loyalty cards…

… with Tata Group’s Empower multi-partner loyalty program among the most successful

24.0 INDONESIA

Introduction

Retailer payment cards

Only two major retailers in Indonesia operate fully-fledged payment cards at present

Foreign retailers now account for around 38.9% of total sales in the formal retailing market

Retailer loyalty cards

Almost a half of major retailers in Indonesia have developed loyalty card schemes

25.0 IRELAND

Introduction

Retailer payment cards

The development of store cards is limited to a minority of Ireland’s larger retailers

Retailer loyalty cards

The comparatively market size has dissuaded many retailers from launching loyalty cards

26.0 ITALY

Introduction

Retailer payment cards

A significant proportion of Italy’s larger retailers have introduced payment cards…

… although competition forces a number of issuers to focus on one major relationship each

Fiditalia has launched Italy’s first shopping centre card in alliance with I Granai…

… as part of an initiative that appears more practical than ind. point-of-sale finance facilities

The card paves the way for the development of retailer-specific loyalty programs…

… and is without precedent in the Italian market…

… albeit there are several challenges associated with the program’s development

Retailer loyalty cards

Many Italian retailers continue to offer a loyalty card unaccompanied by a payment card

27.0 JAPAN

Introduction

Retailer payment cards

Over a quarter of retailer cards in Japan are funded by captive finance entities…

… among which Aeon Credit Service is the largest and most internationally diversified firm…

… with around 2.67 million cardholders outside of Japan, including 950,000 in Hong Kong

Mitsubishi UFJ Nicos is the most commonly used external provider of retailer cards…

… with the newly-merged company having disclosed ambitious targets for future growth…

… although the market fragments rapidly among other captive and non-captive partners

The vast majority of retailer cards in Japan are linked to more than one payment network

Retailer loyalty cards

Over a half of major retailers in Japan have a loyalty card scheme up and running

28.0 MALAYSIA

Introduction

Retailer payment cards

Alliance Bank and RHB Bank each account for a pair of major retailer payment cards

Malaysia’s retailing sector, worth almost RM59 billion in 2006, is modernising rapidly…

… with restrictions designed to curtail the expansion of foreign entrants having been relaxed…..168

… thereby, encouraging international retailers, such as Tesco, to expand more aggressively

Retailer loyalty cards

Multi-merchant loyalty schemes, such as BonusLink, are a key feature of the market…

… and The Store is now able to issue loyalty cards to customers at the point of application

29.0 MEXICO

Introduction

Retailer payment cards

In terms of outright number of partners, Banamex dominates the retailer payment card sector…174

… with its position having been strengthened by the launch of the Affinity Card in March 2007

Coppel and Elektra both issue payment cards through captive banking operations…

… while Chedraui has preferred to established a joint venture company for this purpose

For a variety of reasons, the Mexican authorities are keen to encourage usage of pay. cards

Retailer loyalty cards

Over a third of leading Mexican retail brands operate a loyalty card with no payment facility

30.0 MIDDLE EAST

Introduction

Retailer payment cards

Bahrain enjoys the highest penetration rate in the region for retailer payment cards…

… with Jawad’s card issued through the National Bank of Bahrain among the most popular

Elsewhere in the region, initiatives for retailer payment cards are relatively thin on the ground

Retailer loyalty cards

More than one in five major retail brands in the Middle East operates a loyalty card scheme…

… and a number of local banks also offer loyalty programs for the benefit of their cardholders

31.0 NETHERLANDS

Introduction

Retailer payment cards

Laser Nederland and Comfort Card exercise a virtual duopoly in the retailer pay. card market

Retailer loyalty cards

A majority of Dutch retailers offering loyalty cards have yet to launch their own payment card

32.0 NEW ZEALAND

Introduction

Retailer payment cards

The majority of retailer cards in New Zealand are classifiable as private label schemes…

… although Fisher & Paykel Finance acquired the finance business of Farmers in 2003

Retailer loyalty cards

Not one retailer loyalty card is offered in parallel to a fully-fledged payment card

33.0 NORWAY

Introduction

Retailer payment cards

The majority of retailer payment cards do not carry either the MasterCard or Visa brands…

… including all of those issued by GE Money Bank, the store card market leader in Norway

Retailer loyalty cards

Most Norwegian retailers that have developed a loyalty card do not offer a payment card

34.0 PARAGUAY

Introduction

Retailer payment cards

Three of Paraguay’s larger retail brands have launched co-branded or private label cards

Retailer loyalty cards

Avon, Caro Cuore, Hering, Nike, Quijote Música y Libros and Sporthouse all offer loyalty cards..204

35.0 PERU

Introduction

Retailer payment cards

Peru is characterised by a mix of captive and externally managed retailer pay. card schemes

Banco Azteca harbours ambitious plans to roll out 120 branches serving lower inc. households..207

The development of Banco Ripley’s Financor will benefit from Ripley’s own investment plans

Cards are steadily replacing cheques denominated in US dollars as a preferred pay. method

Retailer loyalty cards

A majority of major retail brands in Peru have introduced a loyalty card with no pay. function

36.0 PHILIPPINES

Introduction

Retailer payment cards

Payment cards have been developed by only a small minority of retailers in the Philippines…

… and much of the local market remains dominated by individually owned sari-sari stores…

… and major foreign retailers have been comparatively slow to expand into the country

Retailer loyalty cards

Loyalty cards have been launched by a clear majority of the country’s leading retailers

37.0 POLAND

Introduction

Retailer payment cards

A significant number of retailer cards in Poland are linked to international payment networks…...217

… with Cetelem having established the most exclusive partnerships with major retailers

Retailer loyalty cards

The majority of retailers with a loyalty card have yet to develop a payment card

38.0 PORTUGAL

Introduction

Retailer payment cards

The payment cards offered by El Corte Inglés and Jumbo are both operated through captives…222

… with as many as seven issuers competing for non-captive store card mandates

Retailer loyalty cards

Major retailers in Portugal are comparatively unenthusiastic when it comes to loyalty cards

39.0 ROMANIA

Introduction

Retailer payment cards

Société Générale’s BRD and Cetelem each lay claim to two exclusive ret. card relationships

Retailer loyalty cards

In addition to the 15 schemes identified, both Intersport and Mega Image plan to launch cards...228

40.0 RUSSIA

Introduction

Retailer payment cards

Progs. for co-branded credit cards are few although pre-paid retailer gift cards are widespread...231

The overall market for credit cards in Russia is believed to be growing rapidly

Finservice is aiming to have established a base of around 500,000 custs. by the end of 2008

GE Money Bank works for cons. credit with other retailers as well as Mosmart and Svyaznoy

Retailer loyalty cards

Over one third of major retailing entities in Russia offer loyalty cards with no payment function

41.0 SINGAPORE

Introduction

Retailer payment cards

As in Japan and Thailand, Isetan utilises a captive finance arm for its private label card

HSBC benefits from its status as the issuer of Dairy Farm International’s Choice Card…

… although it faces comp. from the likes of Citibank, DBS, OCBC and Standard Chartered

Retailer loyalty cards

The Courts Guest Club had amassed close to 320,000 members by the end of 2006…

… and a number of retailers adhere to multi-partner schemes such as Genting World

42.0 SLOVAKIA

Introduction

Retailer payment cards

Most of the limited no. of cards in Slovakia carry either the MasterCard or Maestro marques

Retailer loyalty cards

Fully-fledged payment cards have not yet been issued by any retailers offering loyalty cards

43.0 SLOVENIA

Introduction

Retailer payment cards

Mercator’s Green and Gold PIKA cards constitute Slovenia’s major store card program

Retailer loyalty cards

dm-drogeriemarkt, Mercator, Merkur, Takko and TUŠ have all intro. their own loyalty cards…

… while others are linked to one or more of Slovenia’s shop. centre or multi-retailer schemes

Mercator is seeking to have won a 40% of Slovenia’s groceries retailing market by 2010…

… and had issued almost 900,000 PIKA loyalty or payment cards by the end of 2006

The program will be extended to new sectors including banking, ins., telecoms and travel

44.0 SOUTH AFRICA

Introduction

Retailer payment cards

A number of major retailers continue to issue and manage pay. cards on an in-house basis…

… although Nedbank launched its Go Banking concept in conjunction with Pick n Pay in 2001...253

Many South African retailers offer customers a credit facility by means of the RCS Card

Retailer loyalty cards

Around one quarter of major retail brands in South Africa operate a stand-alone loyalty card

45.0 SOUTH KOREA

Introduction

Retailer payment cards

Over a third of major retailers in South Korea have launched co-branded or private label cards...258

LG Card maintains exclusive or shared links with 14 retailers, including Tesco’s local operation..258

Other issuers competing for retailer mandates include Hyundai Card and Samsung Card

Most retailer card schemes in South Korea are linked to more than one payment network

South Korea has one of the highest pen. rates for credit cards of any market in the world…

… with an average figure of three credit cards per capita and over 92 million cards in circulation.259

Retailer loyalty cards

South Korea’s market is characterised by a high number of multi-partner loyalty schemes…

… including the successful OK Cashbag prog. which has signed up over 20 million members

46.0 SPAIN

Introduction

Retailer payment cards

Spanish retailers are among the most enthusiastic when it comes to payment cards…

… with a majority of programs still classifiable as private label initiatives

MBNA appears to have made little progress in the retailer card market since its entry in 2000

Retailer loyalty cards

Comparatively few large Spanish retailers have introduced stand-alone loyalty cards

47.0 SWEDEN

Introduction

Retailer payment cards

The payment cards of six retailers are issued and managed by captive entities

Sweden possesses a surprisingly high number of competitors jostling for retailer relationships

Having issued around 800,000 cards, Resurs Bank is a leader in the Swedish store card sector.270

Since the late 1980s, IKANO, a sister firm to IKEA, has expanded its ops. into new territories

Retailer loyalty cards

In excess of 25% of major Swedish retailers have introduced loyalty card programs

48.0 SWITZERLAND

Introduction

Retailer payment cards

Cards issued by myOne Services are accepted at around 10,000 points of sale in Switzerland...275

Credit Suisse and OZ Bankers manage the majority of non-captive retailer payment cards

New co-branded cards launched by Coop Schweiz and Migros help to redefine the market

Retailer loyalty cards

Over 30% of major retailers in Switzerland have introduced loyalty cards

49.0 TAIWAN

Introduction

Retailer payment cards

Over a half of the leading retailers surveyed in Taiwan have launched co-branded cards…

… all of which have been endowed with an international payment functionality

Chinatrust Commercial Bank is the most prolific partner of retailers in this domain…

… although Taiwan’s fragmented banking sector results in lively competition for mandates

Taiwan’s credit card market has reached maturity following several years of rapid growth…

… with the vast majority of payment cards in circulation incorporating a deferred pay. option

Retailer loyalty cards

The enthusiasm of Taiwanese retailers for loyalty cards lags only to that of mainland China…

… with Far Eastern Group’s Happy Go scheme having grown strongly since January 2005

50.0 THAILAND

Introduction

Retailer payment cards

GE Money has been instrumental in driving Thailand’s retailer payment card market…

… with other competitors including Aeon Credit Service, Cetelem, Citibank and Kasikorn Bank..287

7-Eleven is one of the investors behind the launch of the Thai Smart Card Company

The co-branded Visa card launched by Citibank and The Mall Group was intro. in July 2007

Retailer loyalty cards

Almost two thirds of leading retailers in Thailand have already introduced a loyalty card

51.0 TURKEY

Introduction

Retailer payment cards

Turkey’s near-ubiquitous multi-merchant loyalty card schemes impede individual ret. initiatives...293

Cards linked to multi-retailer progs. account for around 70% of all credit cards issued in Turkey..293

Retailer loyalty cards

Several major retailers in Turkey have introduced their own loyalty card programs…

52.0 UK

Introduction

Retailer payment cards

Almost a third of major retailers in the UK have introduced their own payment cards

Grupo Santander entered the UK retailer card market by acquisition in March 2008

HSBC has significantly strengthened its competitive position in the retailer card market…

… and the card issuing divisions of several other banks also lay claim to notable relationships

Retailer loyalty cards

Loyalty card schemes introduced by individual retailers are comparatively few in number…

… although the Nectar program has grown rapidly since its launch in September 2002

ipoints has amassed over 60 partners and 15 reward categories since its launch in 2000…

… and lays claim to over one million members generating £1.5 million in revenues

53.0 UKRAINE

Introduction

Retailer payment cards

Few retailer payment cards have yet been launched in the under-developed Ukrainian market…304 Retailer loyalty cards

… although schemes for loyalty cards with no payment function are reasonably widespread

54.0 URUGUAY

Introduction

Retailer payment cards

Co-branded cards have been introduced by four supermarket chains in Uruguay

Retailer loyalty cards

A dozen retailers possess loyalty cards that could be converted into pay. cards in the future

55.0 USA

Introduction

Retailer payment cards

Well over one third of major retail brands in the USA offer a co-branded or private label card

World Financial Network National Bank is one of several major competitors in this sphere…

… although there are over 20 issuers of retailer cards in total, including retailer-owned captives..313

A significant proportion of retailers have developed pre-paid cards for a well-defined audience...314

Retailer loyalty cards

Over one quarter of major retail brands in the USA provide a loyalty card with no pay. function...315

56.0 VENEZUELA

Introduction

Retailer payment cards

The few retailer cards to have been launched in Venezuela are all private label products

Banesco offers credit facilities to inds. belonging to the Club Inteligente multi-partner scheme

Retailer loyalty cards

Almost a half of the major retail brands surveyed offer a loyalty card with no payment function

57.0 VIETNAM

Introduction

Retailer payment cards

Asia Commercial Bank has established itself as Vietnam’s leading issuer of co-branded cards...324

Rapid growth rates make Vietnam one of the most attractive retailing opps. in the world…

… with consumer expenditure patterns shifting quickly in favour of organised retailing formats

Retailer loyalty cards

Over 40% of the country’s leading retail brands have introduced loyalty card programs

Abstract

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