The U.S. Market for Rewards Cards, 2nd Edition : Packaged Facts

The U.S. Market for Rewards Cards, 2nd Edition
Oct 15, 2008
214 Pages - Pub ID: LA1391122
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Chapter 1: Executive Summary
Scope and Methodology
Report Scope
Report Methodology
Market Size & Growth
Consumer Revolving Credit Hits Trillion on Moderate Growth
Higher Charge Off Rates May Signal New Recessionary Period
Figure 1-1: Total Consumer Credit by Category: Revolving and Non-Revolving, 1978-May 2008 (in billions)
Credit Card Market Overview
Credit Card Growth Robust at 10% CAGR
New Cards Increase…And Dormant Cards Awake
Growth in Other Ways as Well
Table 1-1: U.S. General Purpose Credit Card Market, by Purchase Volume, Transaction Volume, Cards Issued, Accounts, Average Cards per Account, and Average Value per Transaction, 2003-2007 (in millions of dollars, except average values)
Purchase Volume Captures 14% of GDP
Visa Takes the Lion Share at 42%
Transaction Volume Continues Steady Increase
Visa Tops Transaction Volume Share, Followed By Amex
Comfort Zones May Be Challenged
Rewards Credit Card Market
Rewards-Based Credit Cards Up 15%
Figure 1-2: Total U.S. Rewards-Based Credit Cards Issued and Share of Total General Purpose Credit Cards, 2003-2007 (in millions) Recent Growth from New Cards and Conversions Points Cards Still Trumping Cash Back Cards
Market Forecast
Rewards Cards to Account for 93% of Credit Card Market
Figure 1-3: Total General Purpose Credit Cards, General Purpose Rewards-Based Credit Cards and Share of Total Credit Cards Forecast, 2007-2012
Credit Card Industry in Flux
The Associations and Issuers
Figure 1-4: Share of Total General Purpose Credit Card Purchase Volume in the U.S., 2007 (percent)
Issuing Banks
Figure 1-5: Top Credit Card Issuers by End-of-Year Domestic Outstandings, 2007 (percent)
Trends: Challenges and Opportunities
Key Payments Industry Drivers: Security, Online, Rates & Rewards .14
Americans Get Over-Extended and Re-Trench
Consumers Making More Practical Purchases, Decrease Spending
Transparency Necessary In Stressful Economic Environment
Consumers Confused, Need Help Navigating
Build Loyalty Through Information Clarity
ID Theft Takes Money and Precious Time
Rewards Programs Must Diversify into More Alternative Payments
Mobile for the Future
Debit Cards Transactions Already Exceeding Credit
Continued Move From Cash/Check to Credit/Electronic
Table 1-2: Total Business-to-Consumer Payments, by Medium, 2003-2007 (in billions of dollars)
Are Interchange Fees Essentially a Tax on the American Consumer?
Rewards Product Trends and Strategies
Values Increasingly Important to Consumers
The Rewards of Being Green
Are High Fee Airline Rewards Still Meaningful?
Still Room for High Brow Rewards
A Movement Toward Holistic, Simplified Programs
Personalization, Control, Choice and Flexibility
Innovation Spurred By Bad Economy
Cash Back Comeback?
Shelling Out the Gas Rewards
Marketing Dynamics
A Swing Back to Retention After Years As Acquisition Tool?
Credit Card Ad Spend at $1.9 Billion For 2007
TV Spend Down
Targeting Through Unique Touchpoints
Overall Credit Card Direct Mail Offers Decline in 2008
Table 1-3: Synovate’s Mail Monitor Direct Mail Volume Losses and Gains, 2008 vs. 2007
Reward Direct Mail Promotions Up, Response Slightly Down in 2007
Evolving Media Consumption Opens Up Opportunities
Behavioral Targeting Opportunities
Co-Branded Credit Card Usage
Approximately 67% of Adults Have/Use Credit Cards
Stagnant Growth in Co-branded Cards Since 2004
Table 1-4: Consumer Ownership and Use of Co-Branded Credit Cards, by Type, 2004 vs. 2008
Co-Branded Card Users Profile Brand Comparison
Table 1-5: Comparison of Demographic Characteristics Favoring Ownership and Use of Specific Co-Branded Cards, 2008 (index)
Financial Security Important to Co-Branded Credit Card Users
Amex Versus Discover: Extremes of Financial Awareness
Chapter 2: The Rewards Cards Market
Scope and Methodology
Report Scope
Report Methodology
Market Size & Growth
Consumer Revolving Credit Hits Trillion
Figure 2-1: Share of Consumer Non-Revolving Credit versus Revolving Credit, 1978-2008 (%)
Growth Tame Compared to Historical
By 2007 Issuers Reported Higher Charge Off Rates
Recessionary Periods Effect on Credit Card Growth
Figure 2-2: Total Consumer Credit by Category: Revolving and Non-Revolving, 1978-May 2008, (in billions of dollars)
Credit Card Market Overview
Credit Card Growth Robust at 10% CAGR
New Cards Increase…And Dormant Cards Awake
Growth in Other Ways as Well
Table 2-1: U.S. General Purpose Credit Card Market, by Purchase Volume, Transaction Volume, Cards Issued, Accounts, Average Cards per Account, and Average Value per Transaction, 2003-2007 (in millions of dollars, except average values)
Purchase Volume Captures 14% of GDP
Figure 2-3: Total General Purpose Credit Card Purchase Volume and Percent of U.S. Gross Domestic Product (GDP), 2002-2007 (in trillions of dollars)
Visa Takes the Lion Share at 42%
Figure 2-4: Share of Total General Purpose Credit Card Purchase Volume in the U.S., 2007 (percent)
Transaction Volume Continues Steady Increase
Figure 2-5: Total General Purpose Credit Card Transaction Volume and Average Annual Transactions per Card, 2002-2007 (in billions)
Visa Tops Transaction Volume Share, Followed By Amex
Figure 2-6: Share of Total General Purpose Credit Card Transaction Volume, 2007 (percent)
High Consumer Penetration Means Slow Growth in Cards Issued and Accounts
Figure 2-7: Total General Purpose Credit Card Accounts, Cards Issued and Average Number of Cards per Account, 2003-2007 (in millions)
Visa and MasterCard Do Interesting Flip Flop in Shares of Accounts 46
Figure 2-8: Share of Total General Purpose Credit Cards Issued, 2007 (percent)
Figure 2-9: Share of Total General Purpose Credit Card Accounts, 2007 (percent)
Comfort Zones May Be Challenged
Figure 2-10: Total General Purpose Credit Cards Issued in the United States, 2003-2007 (in millions)
Rewards Credit Card Market
Rewards-Based Credit Cards Up 15%
Figure 2-11: Total U.S. Rewards-Based Credit Cards Issued and Share of Total General Purpose Credit Cards, 2003-2007 (in millions)
Recent Growth from New Cards and Conversions
Non-Rewards Cards Down But Not Yet Out
Points Cards Still Trumping Cash Back Cards
Market Forecast
Rewards Cards to Account for 93% o f Credit Card Market
Figure 2-12: Total General Purpose Credit Cards, General Purpose Rewards-Based Credit Cards and Share of Total Credit Cards Forecast, 2007-2012
Chapter 3: Corporate Profiles
A Note on Metrics
Credit Card Industry in Flux
Franchise Associations
Issuer Hybrids
Figure 3-1: Share of Total General Purpose Credit Card Purchase Volume in the U.S., 2007 (percent)
Issuing Banks
Figure 3-2: Top Credit Card Issuers by End-of-Year Domestic Outstandings, 2007 (percent)
American Express
Overview
History
1980s Turbulence
1990s: A Time for Reinvention
Competition Heats Up
AmEx Suit a Game Changer
Performance: U.S. Revenue up 17%
Figure 3-3: Total American Express U.S. Revenue, 2003-2007 (in billions of dollars)
Purchase Volume Increases 13% in 2007
Table 3-1: Key U.S. Metrics for American Express, 2003-2007
Recent Rewards Products
American Express Delta Reserve Rewards for the Whole Family
American Express Expands Rewards to Mortgages
Significant Events
Former AmEx Division Free to Compete
Law Suit Funds to Bolster Rewards Programs
AmEx Tops Among J.D. Power Survey
Discover Financial Services
Overview
Diner’s Club Now at Discover
History
Discover Spin-Off
Performance: Discover Struggles to Grow Business
Figure 3-4: Total Discover Financial Revenue, 2003-2007 (in billions of dollars)
Purchase, Transaction Volumes Up Modestly; Fewer Cards Issued
Table 3-2: Key U.S. Metrics for Discover, 2003-2007
Recent Rewards Products
Discover Doubles Patriotism
Discover Motiva Receives Praise
Significant Events
Discover Ranks No. 1 in Customer Loyalty
Discover Offers Credit Monitoring to Cardmembers
MasterCard Worldwide
Overview
History
MasterCard’s IPO
Was the IPO a Rouse to Protect Member Banks?
Collusion to Fix Fees Remains Key to Lawsuits
Essentially Shifting the Lawsuit Risk from Member Banks to Shareholders
Performance: Revenue up 22% over 2006
Figure 3-5: Total MasterCard Revenue, 2003-2007 (in billions of dollars)
Growth from More Customers and Increased Usage
Table 3-3: Key U.S. Metrics for MasterCard, 2003-2007
Current Rewards Products
Elite Rewards for the Affluent
Ameriprise Shuns AmEx in Favor of MasterCard
Barclays & Lufthansa Fly with MasterCard
Significant Events
MasterCard Settles AmEx Suit for $1.8 Billion
MasterCard Mobilizes with Obopay
Visa, Inc.
Overview
History
Reorganization and Initial Public Offering
Performance: Visa Revenue Reaches $3.6 Billion
Figure 3-6: Total Visa Inc Revenue, 2003-2007 (in billions of dollars)
Visa Grows Steadily
Table 3-4: Key U.S. Metrics for Visa, 2002-2006
Recent Rewards Products
Visa Reaps Rewards from Barclays and L.L. Bean
This Bud—and Three Points—for You
Visa Teams up with uTango
Significant Events
Visa Implements New Fraud Protection Program
Visa Restructures Service Station Interchange Fees
Bank of America
Overview
BofA a Behemoth
Too Big?
Branching out
Leading in Community Development
Performance: Card Revenue Softens
Figure 3-7: Total Bank of America Card Revenue, 2003-2007 (in billions of dollars)
Figure 3-8: Total Bank of America U.S. Credit Card Outstandings, Managed Basis, 2003-2007 (in billions of dollars)
Recent Rewards Product
Olympic Rewards
Unique Rewards Between BofA and AmEx
Significant Events
BofA Ranked the Safest
Active Card Control Innovation
Capital One Financial
Overview
Performance: Credit Card Revenue up 11% in 2007
Figure 3-9: Total Capital One Financial Card Revenue, 2003-2007 (in billions of dollars)
Figure 3-10: Total Capital One Financial Credit Card Outstandings, Managed Basis, 2003-2007 (in billions of dollars)
Recent Rewards Product
Capital One and Orbitz Offer Triple Points
Significant Events
Capital One teams up for Financial Education
Capital One Personalization Offers Differentiation
Citigroup
Overview
Under the Umbrella
Significant Card Portfolio Acquisitions
Performance: Card Revenue Declines 1%; Outstandings up 5%
Figure 3-11: Total Citigroup U.S. Card Revenue, 2003-2007 (in billions of dollars)
Figure 3-12: Total Citigroup U.S. Credit Card Outstandings, Managed Basis, 2003-2007 (in billions of dollars)
Recent Rewards Product
Citi Expands Diamond Preferred
Significant Events
Citi Embraces Mobile Access
Citi Backs Alternative Payments Company
JPMorgan Chase
Overview
Performance: Card Business Growth Moderate
Figure 3-13: Total JPMorgan Chase U.S. Card Revenue, 2003-2007 (in billions of dollars)
Figure 3-14: Total JPMorgan Chase U.S. Credit Card Outstandings, Managed Basis, 2003-2007 (in billions of dollars)
Recent Rewards Product
Chase and Continental Increase Flexible Rewards
Options for the Affluent
Chase Gets an Ace with the U.S. Tennis Association
Chase Flies the Friendly Skies
Helping to Manage Rewards
Significant Events
JPMorgan Chase Snatches up WaMu
Chase acquires Target Receivables
Washington Mutual, Inc.
Overview
Performance: Outstandings up 15%
Figure 3-15: Total Washington Mutual Card Revenue, 2006-2007 (in billions of dollars)
Figure 3-16: Total Washington Mutual Credit Card Outstandings, Managed Basis, 2003-2007 (in billions of dollars)
Recent Rewards Product
Fox Rewards
Significant Events
WaMu Saves Trees
Wells Fargo & Company
Overview
Performance: Outstandings up an Astounding 22%
Figure 3-17: Total Wells Fargo U.S. Card Revenue, 2003-2007 (in billions of dollars)
Figure 3-18: Total Wells Fargo Credit Card Outstandings, Managed Basis, 2003-2007 (in billions of dollars)
Recent Rewards Product
Wells Fargo Helps Customers Go Solar
Pushing Online Banking, Paperless Statements
Eco-Friendly Rewards
Revolution Money
Overview
Chapter 4: Trends: Challenges and Opportunities
Consumers, Wall Street and Main Street in For a Wild Ride
Key Payments Industry Drivers: Security, Online, Rates & Rewards
Rewards Has the Power of Positivity
Transparency Necessary In Stressful Economic Environment
Economic Crisis Peaks
Americans Get Over-Extended
Consumers to Re-Trench
Figure 4-1: Financial Obligations Ratio (FOR) and Charge-off and Delinquency Rates for Loans and Leases at Commercial Banks, 1985-2008 (percent)
Hints of What’s to Come
Consumer Credit Hangover: Personal Savings Rate Near Zero
Consumers Making More Practical Purchases
Table 4-1: Percentage of Adults Who Are More Practical or Realistic in Their Purchases, Month-Over-Month, October 2007-April 2008 (U.S. adults)
Consumers to Decrease Spending
Table 4-2: Percentage of Adults Who Are Planning to Decrease Spending, Month Over Month, October 2007-April 2008 (U.S. adults)
The Splurge Factor
Consumers More Aware of Credit Pitfalls
Three Percent of Consumers Participate in 10+ Programs
There is Still A Learning Curve For Issuers Too
Consumers Confused, Need Help Navigating
40% of Consumers Call For Clarity in Terms
Card Issuer Sites New Improvement
Consumer-Friendly Comparison Sites Pick Up Slack
Table 4-3: Selected Comparison Sites, 2008
Build Loyalty Through Information Clarity
Four Percent Of American ID Theft Victims
ID Theft Takes Money and Precious Time
Identity Theft Will Require Ongoing Education
Rewards Programs Must Diversify into More Alternative Payments
By 2012 24% of Online Spend Via Alternative Payments
Contactless and Mobile for the Future
230 Million American Cell Phones Waiting To Become Credit Cards
77% of Cell Phone Users Have Yet to Make a Purchase
Future For Targeted Marketing Opportunities Exciting
Debit Cards Transactions Already Exceeding Credit
14 Percentage Point Increase in Debit Use since 2006
Debit Increasingly Preferred For Purchase Across Categories
Gasoline Purchases See Equal Credit/Debit Use
Table 4-4: Payment Options Used, by Type of Purchase: September 2003, 2005, and 2007 (percent)
Figure 4-2: Payment Options Used, by Type of Purchase, September 2007 (percent)
Continued Move From Cash/Check to Credit/Electronic
Table 4-5: Total Business-to-Consumer Payments, by Medium, 2000-2007 (in billions of dollars)
Paper Share Drops From 54% in 2003 to 39% in 2007
Figure 4-3: Estimated Share of U.S. Personal Consumption, by Major
Payment Medium, 2003-2007 (percent)
Interchange Fee Suits
Ramifications of Antitrust Suit
Effect on Rewards Cards
Consumers Moving Away From Fee-Based Cards
Are Interchange Fees Essentially a Tax on the American Consumer?
Regulation on the Horizon?
Small Ticket Purchase Driving Higher Rates
Chapter 5: Rewards Product Trends and Strategies
Values Increasingly Important to Consumers
The Soul of a Card: Enlightenment Visa Reward Card
The Rewards of Being Green
Most Major Issuers Play In the Green Grass
Some Consumers Skeptical of Greenwashing
But Is It Just Ethical Lip Service?
Are High Fee Airline Rewards Still Meaningful?
The Airline Shakeout
Consumers May Check Out Completely
Single Relationships and High Loyalty Flyers Will Persevere, For Now
Still Room for High Brow Rewards
Citi Goes VIP
World Elite MasterCard and Virtuoso Travel Network
Luxury Is Not Lost
Out of This World Rewards
A Movement Toward Holistic, Simplified Programs
Chase and Joint Rewards
Is the Future in Card Collectives?
MasterCard’s Relationship Rewards Multi-Account Technology
Personalization, Control, Choice and Flexibility
MasterCard’s Name Your Own Reward
Technology Makes It Possible: Chase Freedom
Consumers Make Decision: Capital One Card Lab
Merchant Specific Alternatives
Entertaining Business Builders
Innovation Spurred By Bad Economy
Cash Back Comeback?
Impersonal Nature of Cashback Is a Challenge
Supermarket Cash Back Rewards Cards
Shelling Out the Gas Rewards
Chapter 6: Marketing Dynamics
A Swing Back to Retention After Years As Acquisition Tool?
Credit Card Ad Spend at $1.9 Billion For 2007
Credit Card Ad Spend Down in TV, Up in New Media
Overall Credit Card Direct Mail Offers Decline in 2008
Table 6-1: Synovate’s Mail Monitor Direct Mail Volume Losses and Gains, 2008 vs. 2007
Reward Direct Mail Promotions Up, Response Slightly Down in 2007
Beware the Do-Not-Mail Movement
Evolving Media Consumption Opens Up Opportunities
World of Warcraft & Visa Reward The Entertainment Driven Consumer
Free Entertainment a Motivator in Poor Economy
20th Century Fox & WaMu Team Up
Technology Changing Credit Card Outreach
Behavioral Targeting Seeing Little Use
Targeted End-User Marketing In Debate
Word-of-Mouth: Added-Value for Marketers and Consumers
WOM a Real Business
Proof in the Numbers
Viral Card Design Contest Shows Power of WOM
Chapter 7: Co-Branded Credit Card Usage
Note on Simmons Market Research Bureau Data
Data Presented for Co-Branded Cards
Approximately 67% of Adults Have/Use Credit Cards
Stagnant Growth in Co-branded Cards Since 2004
Other Sources Show Greater Short-term Shift in Credit Cards Overall
Table 7-1: Consumer Ownership and Use of Co-Branded Credit Cards, by Type, 2004 vs. 2008
Demographic Profile: Visa vs. Co-Branded Visa Credit Card Holders
Table 7-2: Demographic Characteristics Favoring Ownership and Use of Co-Branded Visa Cards, 2008 (index)
Demographic Profile: MasterCard vs. Co-Branded MasterCard Credit Card Holders
Table 7-3: Demographic Characteristics Favoring Ownership and Use of Co-Branded MasterCard Cards, 2008 (index)
Demographic Profile: Discover vs. Co-Branded Discover Credit Card Holders
Table 7-4: Demographic Characteristics Favoring Ownership and Use of Co-Branded Discover Cards, 2008 (index)
Demographic Profile: American Express vs. Co-Branded American
Express Credit Card Holders
Table 7-5: Demographic Characteristics Favoring Ownership and Use of Co-Branded American Express Club Cards, 2008 (index)
Co-Branded Card Users Profile Brand Comparison
Table 7-6: Comparison of Demographic Characteristics Favoring Ownership and Use of Specific Co-Branded Cards, 2008 (index)
Demographic Profile: Co-Branded Airline/Hotel Card Users
Table 7-6: Demographic Characteristics Favoring Ownership and Use of Co-Branded Airline/Hotel Cards, 2008 (index)
Demographic Profile: Co-Branded Airline/Hotel Cards By Brand
Table 7-7: Demographic Characteristics Favoring Ownership and Use of Co-Branded Airline/Hotel Cards by Card Brand, 2008 (index)
Demographic Profile: Co-Branded
Affiliations/Associations/Organizations Users
Table 7-8: Demographic Characteristics Favoring Ownership and Use of Co-Branded Affiliations/Associations/Organizations Cards, 2008 (index)
Demographic Profile: Co-Branded Affiliations/Associations By Brand
Table 7-9: Demographic Characteristics Favoring Ownership and Use of
Co-Branded Affiliate/Organization/Association Cards by Card Brand, 2008 (index)
Demographic Profile: Co-Branded Auto Card Users
Table 7-10: Demographic Characteristics Favoring Ownership and Use of
Co-Branded Auto Cards, 2008 (index)
Demographic Profile: Co-Branded Auto By Brand
Table 7-11: Demographic Characteristics Favoring Ownership and Use of
Co-Branded Auto Cards by Card Brand, 2008 (index)
Financial Attitudes of Co-Branded Credit Card Users
Financial Security Important to Co-Branded Credit Card Users
Amex Versus Discover: Extremes of Financial Awareness
Table 7-12: Statements Indicating Interest in Financial Security, 2008 (index)
Amex Holders Do Their Research
MasterCard Users Are Amateur Advisors
Table 7-13: Statements Indicating Level of Financial Capability, 2008 (index)
Appendix
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