The reorganisation of BNP Paribas’s retail banking business unit will help unlock the underexploited potential of its global cards business, according to the French bank’s head of cards and electronic banking.
In an interview with RBI’s sister publication Cards International, Gilbert Arira said the restructuring, which aims to link up the international parts of BNP Paribas’ consumer banking enterprise, would help the cards business take advantage of the group’s global scale. He also revealed a four-point strategic plan to increase the business’s profitability – including an ambitious aim to sign up every retail banking customer to a card product.
The plan included:
• ‘One account, one card’: Arira said the bank is aiming to cross-sell cards to more of its retail banking customers across the franchise;
• Activation: ensuring customers continue to spend on BNP Paribas products once they have signed up for a card;
• Customisation: allowing customers to choose card designs and customise features, benefits and loyalty programmes;
• Internet distribution: the business aims to originate 10 percent of its card sales through the internet within the next two years, and offer online customisation services.
BNP Paribas (BNPP) has 45 million cards in issue, 25 million of which are credit cards and 20 million are debit and deferred debit cards. Of those, 39 million are outside France. The cards division, which is now part of the bank’s new Personal Finance division, contributes around 8 percent of BNPP’s retail banking profit. That equates to a half-yearly profit of roughly €196 million ($288.7 million) on retail banking profit of €2.45 billion.
Arira said: “The cards business has a potential which has so far been underexploited. There is a lot of room for improvement, especially in emerging markets where there is the potential for very rapid growth.”
He added: “We have been through a major reorganisation in retail banking to become more globally focused, and cards will be one of the main drivers in the organisation. It is starting now and the goal is we want to be a global player.”
The bank has announced a raft of structural changes to its business as it attempts to leverage its global retail banking franchise. Most recently, BNPP announced changes at the executive board level, which saw the roles of head of retail banking (Jean-Laurent Bonnafé) and head of international retail services (Pierre Mariani) brought closer together.
The new Personal Finance division
In November last year BNPP announced it would combine Cetelem, its specialist consumer finance business, and UCB, its mortgage unit, into a new Personal Finance division. In May this year, it also brought together some of the country units of Cetelem with La Ser, a 50:50 joint venture with the second-largest French retail chain Galeries Lafayette. La Ser specialises in card-based loyalty schemes and personal loans, and had 10 million registered customers in 2007, with a turnover of €1.9 billion (see RBI 592).
The overall aim is to increase outstandings within the new Personal Finance entity to €160 billion by 2010, compared to €94.6 billion in 2007. BNP Personal Finance, ranked the largest consumer finance operation in Europe in terms of numbers of customers, aims to break into the global top five in two years, competing with the likes of HSBC, Citi and GE Money. The bank has recently launched a worldwide marketing push in the same vein as international rivals ING and Santander; BNPP sponsors high-profile tennis tournaments including the Davis Cup and Paris Masters and recently launched a €25 million global TV advertising campaign.
Most of the businesses’ growth is likely to come from outside France. Arira believes the best opportunities for credit card volume growth exist in Central and Eastern Europe (CEE), where credit cards are not widespread, Latin America and in North Africa. In many CEE countries, credit card businesses see an opportunity to switch consumers from salary cards, used mainly to withdraw cash from ATMs, to more advanced product offerings which can be used for internet and point-of-sale purchases.
The bank is also placing an emphasis on standardising cards products across its subsidiaries and building universal platforms to reduce costs and improve customer service – a process also being undertaken by rival HSBC. Arira said: “This, of course, does not mean one size fits all. We will provide the basis of common products and each subsidiary will be able to customise them to fit their market place.”
The main issue in the cards industry remains uncertainty around interchange from the European Commission. The commission recently ruled MasterCard’s cross-border fee illegal, and is also investigating Visa Europe’s cross-border interchange charges. But it has continued to push the idea of a third pan-European scheme to compete with Visa and MasterCard, which it recently indicated may also be permitted to charge interchange.
Arira said: “The commission is saying one thing one day and something else the next. It is difficult to know where they want to go. It is a critical component of the business – one third of it comes through interchange – and in many areas if you come to an interchange at zero you come to a non-profitable business. There are also pressures in the US as well, and it is difficult without knowing what the return on investment will be.”