Insight Report: Best Practice in the Reward Credit Card Sector

Banks are increasingly using rewards and loyalty programs as a tool for maintaining relationships with top-end customers, as these relationships provide high potential for revenue generation. Financial institutions are putting forward premium experiences and offers to increase loyalty and develop deeper banking relationships. Rightly positioned, unique rewards act as a key differentiator in a highly commoditized financial services market.

To remain profitable, banks have been making changes to their strategies and operational models which includes finding the optimum mix of funding options and reward offerings to achieve greater levels of customer loyalty and profitability. Both issuers and card schemes are partnering with airlines, hotels and popular brands to offer merchant-funded rewards. The strategy allows card issuers to improve the value of their reward credit cards without putting upward pressure on costs.

Consumers are traveling more than ever, and forecasts for outbound trips indicate that this trend will continue over the next five years in key economies. Consequently, card issuers and schemes offer credit cards that focus on travel benefits to increase customer retention and attract new customers. Travel credit card customers are often offered lounge access at airports, free or heavily discounted air tickets, preferential treatment at hotels and resorts, free valet parking, discounted limousine services, and insurance cover that ranges from travel accident to lost and delayed baggage, to trip cancellation.

There is increased investment in customer engagement strategies. Schemes and issuers are offering personal concierge services on their top-end credit cards, or access to exclusive events to differentiate their products. Issuers are also expanding their presence on social media and mobile platforms through various apps to drive brand loyalty. The increasing popularity of social media and smartphones also allows card issuers opportunities to enhance their marketing efforts while keeping costs low. In addition, customer check-ins at various locations using smartphones has opened up opportunities for a more targeted marketing effort that saves issuers resources, while providing more relevant deals and offers to customers.

Scope

• GlobalData's 'Insight Report: Best Practice in the Reward Credit Card Sector' report covers the market size of credit cards in six key markets.

• This report provides a comparative analysis of benefits and services offered by over 80 reward credit cards in key markets.

• It covers key business drivers for card issuers to issue reward credit cards for various customer segments.

• It covers key strategies adopted by card issuers for the six countries covered in the report.

• It also provides case studies based on best practices adopted by the card issuers in these countries.

Key Highlights

• Consumers are moving away from conspicuous consumption to more considered consumption, and access to special or unique experiences through their card has gained importance. In this altered environment, banks and other card issuers are adopting various strategies to decrease operating costs and increase revenue potential.

• Banks and other card issuers are increasingly focusing on credit cards designed to target mass affluent consumers driven by the relatively high profitability offered by this segment. At times, banks may run the cards at a loss, but benefit from the rest of their relationships with clients through deposits, investments, savings, mortgages, and asset and wealth management make this practice advantageous.

• Card issuers have increased their focus on issuing credit cards with travel benefits. Many issuers across the world, including Bank of America, Chase, Citibank, HSBC, Commonwealth Bank, Lloyds, Capital One, Hyundai Cards, Samsung Cards and Amex, among others, issue premium cards which specifically focus on travel-related services.

Reasons to buy

• Gain insights into market potential for reward credit cards in six key markets.

• Gain insights into the product strategies of card issuers in key markets.

• Gain insights into current and future sector dynamics for reward credit cards.

• Understand emerging trends and drivers to streamline product offerings.

Companies mentioned

American Express

JPMorgan Chase

Citibank

Barclays

Capital One

Canadian Imperial Bank of Commerce

Royal Bank of Canada

TD Canada Trust

Bank of Montreal

Commonwealth Bank

Westpac

National Australia Bank

Shinhan Bank

Hyundai Card

Samsung Card

Visa

MasterCard

Virgin Money

MBNA

Lloyds Bank

Tesco

Nationwide

Bank of America

Postbank

Targobank

Kreissparkasse Ludwigsburg

Mercedes Bank

David Jones

KB Kookmin

Table of Contents

1 Executive Summary

2 Global Reward Credit Card Sector Dynamics

2.1 Industry Snapshot and Future Outlook

2.2 Key Trends and Drivers

2.2.1 Emerging trends

2.2.2 Market drivers

3 Reward Credit Cards in Key Markets

3.1 The US

3.1.1 Market potential – credit card market size

3.1.2 Product comparison

3.1.3 Strategies

3.2 Canada

3.2.1 Market potential – credit card market size

3.2.2 Product comparison

3.2.3 Strategies

3.3 The UK

3.3.1 Market potential – credit card market size

3.3.2 Product comparison

3.3.3 Strategies

3.4 Germany

3.4.1 Market potential – credit card market size

3.4.2 Product comparison

3.4.3 Strategies

3.5 Australia

3.5.1 Market potential – credit card market size

3.5.2 Product comparison

3.5.3 Strategies

3.6 South Korea

3.6.1 Market potential – credit card market size

3.6.2 Product comparison

3.6.3 Strategies

4 Best Practices and Case Studies

4.1 Best Practice

4.1.1 Partnerships with merchants and service providers

4.1.2 Product segmentation and rebranding to offer simplified products

4.1.3 Redefining pricing based on nature of banking relationship

4.1.4 Customer engagement using social media

4.2 Case Studies

4.2.1 Branding strategy – Hyundai Card’s use of letter and number cards

4.2.2 Customer engagement – BMO using promotions and digital channels to increase card sales

4.2.3 Customer segmentation – Amex offering different cards to target wider customer base

4.2.4 Lowering cost – Citibank offering rewards through mobile app

5 Appendix

5.1 Methodology

5.2 Contact GlobalData

5.3 About GlobalData

5.4 GlobalData’s Services

5.5 Disclaimer

List of Tables

Table 1: Reward Credit Cards – Current Development and Future Outlook

Table 2: Outbound Business or Leisure Trips (Million)

Table 3: Social Media in Retail Banking Functions

Table 4: The US – Credit Cards in Circulation (Million), 2009–2018

Table 5: Cashback Credit Cards in the US

Table 6: Shopping Reward Point Credit Cards in the US

Table 7: Travel Reward Point Credit Cards in the US

Table 8: Canada – Credit Cards in Circulation (Million), 2009–2018

Table 9: Cashback Credit Cards in Canada

Table 10: Shopping Reward Point Credit Cards in Canada

Table 11: Travel Reward Point Credit Cards in Canada

Table 12: The UK – Credit Cards in Circulation (Million), 2009–2018

Table 13: Cashback Credit Cards in the UK

Table 14: Shopping Reward Point Credit Cards in the UK

Table 15: Travel Reward Point Credit Cards in the UK

Table 16: Germany – Credit Cards in Circulation (Million), 2009–2018

Table 17: Discount and Cashback Credit Cards in Germany

Table 18: Shopping Reward Point Credit Cards in Germany

Table 19: Travel Reward Point Credit Cards in Germany

Table 20: Australia – Credit Cards in Circulation (Million), 2009–2018

Table 21: Shopping Reward Credit Cards in Australia

Table 22: Travel Reward credit cards in Australia

Table 23: South Korea – Credit Cards in Circulation (Million), 2009–2018

Table 24: Discount and Cashback Credit Cards in South Korea

Table 25: Shopping Reward Point Credit Cards in South Korea

Table 26: Travel Reward Point Credit Cards in South Korea

Table 27: Amex – Credit Cards Offered

List of Figures

Figure 1: Rewards Credit Cards – Issuer Focus by Category

Figure 2: The US – Credit Cards in Circulation, 2009–2018

Figure 3: Canada – Credit Cards in Circulation, 2009–2018

Figure 4: The US – Credit Cards in Circulation, 2009–2018

Figure 5: Germany – Credit Cards in Circulation, 2009–2018

Figure 6: Australia – Credit Cards in Circulation, 2009–2018

Figure 7: South Korea – Credit Cards in Circulation, 2009–2018

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