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Latest WCI Research
Selected findings from recently updated markets.

Poland
Malaysia
Netherlands
Ireland
UK
US
Kuwait
Indonesia
Vietnam
Oman

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Poland

	There is still significant scope for further penetration of the market in terms of card numbers and further migration of cash withdrawal to point of sale transactions. More active marketing of credit card products to consumers is thought to be the key to improving education and awareness of credit card functionality and added benefits (such as discounts and loyalty programmes).
	Although credit cards have almost doubled in number over the last three years, debit cards dominate the cards market and are likely to retain their position in the medium-term. The number of debit cards increased by less than 20 percent in the same period. With 57 debit cards per 100 adults and 26 charge and credit cards per 100 adults at the end of 2007, there is still significant potential for development in both market segments.
	In 2007, pre-tax profits on credit cards in Poland decreased by an estimated 20 percent to $71 million, and are forecast to decrease a further 2 percent between 2007 and 2008. Profits per card are relatively low and are forecast to decline further under pressure from a number of sources, including inactive cards, a high level of bad debts and downward pressure on merchant service charges.

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Malaysia

	Malaysia has a burgeoning and highly competitive credit cards market, which has seen rapid growth in recent years with both cards numbers and total spend more than doubling between 2002 and 2007 to 9.9 million and $17 billion respectively. This follows aggressive strategies pursued by issuers in both pricing and product development to grow the market. At the heart of this growth, has been product innovation, with Malaysia�s young and dynamic population playing a key role in supporting the adoption of the latest card technology developments. In 2004, Malaysia was the first country to trial Visa�s payWave contactless technology and was one of the first to see significant roll out. It has also been innovative in reaching out to consumers through sophisticated product segmentation, including co-branded and merchant partnerships offering specific benefits to target customers. While to encourage usage, the cards industry has developed flexible approaches to payment, including interest-free and interest-bearing installment plans and low rate balance transfers.
	Despite this success there remain difficult challenges facing the card industry in Malaysia. Merchant acceptance is still relatively low, which has not been helped by the traditional high level of credit card fraud in the market. The industry has been working to put significant resources to build the level of merchant acceptances and has been boosted by the country�s switch to EMV-compliant cards in 2006, which has significantly reduced the rate of card fraud. At the end of 2007, there were approximately 134,000 POS terminals accepting credit cards in Malaysia or roughly 5 terminals per 1,000 population, behind the level of most developed cards markets around the world.
	The highly competitive nature of the market also means margins are being squeezed in many areas, including annual card fees and merchant fees, while regulation to give early re-payers reduced APR could also potentially hit interest revenue. New issuers looking to enter the Malaysian credit cards market will require an aggressive approach with a strong and wide ranging product offering to be able to penetrate this crowded market place. Nevertheless the market operates with a relatively healthy profit per card estimated at $44 at the end of 2007.

Netherlands

	From a borrowing (and consumer finance) perspective, the credit card market�s biggest competitors are funds accessed via mortgage loans and bank overdrafts. From a payment instrument perspective, the �deferred-debit credit card� and store card are also popular in the Netherlands, but debit cards by far dominate the payment cards market. However, since 2003 there has been a shift towards credit card debt and with credit card outstandings increasing up until 2006 but decreasing in 2007. It remains overall one of the fastest growing consumer credit products.
	The Netherlands has a highly concentrated banking sector. The four largest banks together hold a market share in excess of 95 percent in terms of cards in issue.No new entrants are anticipated in the market in the short-term.
	Relatively high merchant service charges (MSCs) are ensuring a very good return on assets for the institutions present in this market. Although as MSC�s continue to drop slightly in the next few years so will the proportion of revenue derived form merchants. However, profitability can be significantly improved by increasing penetration, rollover rates (and interest income) and usage at the POS.

Ireland

	The Irish credit cards market has seen strong and healthy growth in recent years; while card numbers have increased by 23.3 percent between 2002 and 2007 to 2.3 million, POS spend has more than double in the same period to $20.6 billion. However, the industry will need to continue to work on the development of all cards (including credit cards) as a means of payment with Ireland having one of the highest rates of cash and cheque usage in Europe.
	Despite relative strong performance of credit cards in Ireland, the market remains hindered by a government imposed tax, which has stifled competition and card number growth, while erecting a significant barrier to entry for new issuers. The duty also means that the Irish market is one of the world-leaders in profitability, while at the same time maintaining a level of cards per capita significantly lower than many other developed markets such as the US and UK, as consumers tend not to own multiple credit cards due to the extra fees involved. Responding to increased vocal opposition from both retailers, banks and consumer organisations, the government decided to lower stamp duty on credit cards from $58.9 to $44.2 at the start of 2008.
	Recent product launches, however, suggest issuers are taking a more aggressive approach to building and maintaining market share. In 2008, Ireland�s two leading issuers, Allied Irish Bank (AIB) and Bank of Ireland (BOI), which control around 70 percent of the market, launched the country�s two lowest rate credit cards at 8.5 and 9.5 percent respectively, suggesting a price war is about to ensue. Traditionally both banks have issued standard credit cards which have been among the highest rates in the country.

	The only country in Europe to have more credit cards than people has witnessed slowdown in credit card lending over the last three years. The decreasing number of credit cards in issue over the last few years is a consequence of saturation of the market but also the unfavourable economic environment and decreasing profitability. In addition, following the increased bad debt issuers have taken measures such as debt consolidation, lowering credit limits of risky customers and stricter credit scoring for new cardholders. Ultimately, following the attractive balance transfer offerings from issuers, cardholders with more than one credit card in their wallets have been inclined to transfer all their card balances to a single credit card.
	Given limited growth opportunities in the contracting lending market most issuers are now focusing on increasing credit card usage for everyday purchases through various loyalty and rewards programmes and innovative products. Also, it is expected that an increasing number of issuers will begin to charge annual fees.
	Although price competition, such as zero percent balance transfers, is still an important competition tool in the market, the market has recently moved to greater emphasis on customer retention and improving customer services. In addition, the issuers have also intensified activities on cross-selling, offering credit cards at preferential rates and consolidation of their credit card portfolios in order to improve the clarity of their portfolios to their customers.

	Growth in US consumer credit outstandings has been driven in recent years by mortgage lending, including home equity loans, although this slowed in 2007 and will continue to grow at a slower pace in 2008 and 2009.
	Due to the mature nature of the US credit card market, it is difficult for issuers to differentiate themselves from the competition solely through pricing initiatives such as introductory interest rates or zero percent balance transfers; the area that is really driving competition in the market is rewards, such as airline miles or cash back.
	A combination of concerns about high gas prices and market conditions, such as high credit card fees for retailers that help keep prices high, and a fierce campaign led by groups like the Merchants Payments Coalition, has pushed the issue of interchange back onto the agenda for US lawmakers.

Kuwait

	The Kuwait mortgage market formed more than 49.4 percent of the total consumer credit market in 2007. The most popular non-mortgage credit products are loans enabling margin financing (the purchase of stocks or securities), which comprised an estimated 60 percent of total non-mortgage credit in 2007.
	Kuwait has one of the highest usage rates of debit cards within the Middle East and North African region. Debit card usage at point of sale outlets comprised around 28 percent of total debit card billed volumes in terms of value during 2007 and was almost 4.8 times the credit card spending at point of sale. For payment of goods customers predominantly use debit cards within the country.
	The competition for card issuing is concentrated among the top four players, which held over 90 percent of total card base in 2007.

Indonesia

	The Indonesian credit card market is still in its nascent stage of development and is one of the least developed markets in the Asia Pacific, not only by credit card penetration but also by the average ticket size.
	The market has seen a slight decrease in popularity of cash and cardholders tend to use their cards only when they see an opportunity to benefit from rewards and discounts. Multiple cardholding has increased significantly over the last two years as this has allowed cardholders to benefit from discounts and reward schemes at various retailers.
	The market for premium cards is being driven by the perceived greater prestige of being a Gold or Platinum cardholder. As a result of the issuers� strategy to build up their market shares based on customers aspirations of holding premium cards, what used to be Silver card has become Gold and what used to be Gold has become Platinum card. Thus, Gold and Platinum products represent a significant proportion of the market.

Vietnam

	Vietnam is a consumer banking market on the move. Until early 2008, when the market faced high interest rates and growing inflation, mortgages, car loans and unsecured personal loans grew very quickly. The banking system, most of which is state-owned, has witnessed an evolving business environment and regulatory landscape and also consolidation as more foreign banks enter the market and prompt state-owned banks to restructure.
	Vietnam�s cards market is still in a nascent stage of development in terms of the number of cards in issue, product maturity and consumer uptake. There is much room for issuers to tap into an estimated 10 million Vietnamese considered eligible for credit cards, with only half a million credit cards issued by the end of 2007.
	Despite the rapidly increasing size of the middle-income market segment and their growing willingness to use cards, the main challenges in credit cards remain the limited acquiring network, high surcharging fees and the lack of human resources to manage the consumer lending industry - all of which might jeopardise long-run growth in the market if they are not soon eradicated.

Oman

	Oman has a small credit cards market of 121,000 cards, which is partly explained by restrictions placed on banks in their ability to issue. These include requirements that the customer has a salary assigned bank account. As a result the ability of banks to promote credit cards is largely limited to offering complimentary credit cards to personal loans customers.
	Nevertheless the cross selling of credit cards to personal loans customers would seem a logical step in a country where this form of consumer credit represents the largest single loans product, over 72 percent of the total consumer debt (including mortgages). While credit cards are struggling to compete with personal loans, mainly due to the competitive pricing of the latter, issuers will hope that targeting these customers through offering complimentary credit cards will help expand the market.
	While changing restrictions on whom banks can issue credit cards is key to the expansion of credit cards in Oman, issuers have nevertheless responded to these problems through developing programmes to encourage the existing customer base to spend more on credit cards, in particular at the point of sale. These include the rolling out of loyalty programmes, reward schemes and offering various discounts at the point of sale, as well as offering prize draws for card holders. This has largely been successful with spend at the point of sale growing from 54 percent of total credit card spend in 2003, to 63.5 percent by the end of 2007.

World Cards Intelligence is Lafferty Group�s online source for critical market and competitor intelligence on credit cards & consumer lending.

Research Insights:
The research insights are compiled by members of the World Cards Intelligence research team based on the findings of recently updated markets.

www.laffertyinsights.com

Recent insights include:

Credit cards: a new Turkish delight
Price wars in the Thai credit cards market
Taiwan: avoiding credit crises � a fine balance

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