Rodrigo Amaral talks to Rui Mendes, head of cards at Portugal’s largest retail bank, Caixa Geral de Depósitos. Despite being the market leader in a number of retail banking product lines, CGD remains far behind in terms of credit cards. It is hoping a string of innovative products will win it quick market share.
State-owned Caixa Geral de Depósitos (CGD), Portugal’s largest retail banking group with 776 branches and a 33 percent retail banking market share, has launched a major credit card offensive through to the end of 2008 as it looks to use its market dominance to close out commercial rivals Millennium BCP and Banco BPI. CGD has rolled out a string of new, innovative card products over the past few months, and more are in the pipeline. The idea is to offer cards with services and benefits that exploit the strengths of the whole group, which is also Portugal’s largest life and non-life insurer and unit trust manager.
“We are aware that our clients are chased by other companies that offer them credit cards,” says Rui Mendes, head of cards at CGD. “So we decided some three years ago to cover all product areas in order to serve private and corporate clients alike.”
The latest segment to be targeted is women. In early June, the bank launched Caixa Woman, a mini credit and debit card which looks to appeal to the market with a range of benefits that include insurance packages and discounts of up to 5 percent in certain shops.
CGD has signed agreements with the providers of services that it believes are of particular interest to the segment: they can use the card to pay less for flowers or baby-sitting services, as well as beauty treatments, laundry services, and home renovation and gardening products, among others.
“They are the first cards for women in Europe, and maybe in the world, in the mini card format,” Mendes tells RBI.
Caixa Woman is the most recent example of a string of initiatives trying to convince CGD’s clients and potential customers about the benefits of using its credit cards. “We are always looking at opportunities to launch new products, both in tandem with external partners, but also within the many areas where Caixa is already a player in the market,” adds Mendes.
In the former group belong initiatives like last April’s launch of a credit card in partnership with ANF, the Portuguese association of pharmacies, through which customers can postpone payment for medicines by up to 135 days. ANF expects that more than 440,000 Cartões Farmácias Portuguesas will be issued up until the end of the year.
Targeting specific market segments
In the other half of its strategy are products like the Leve Card, aimed at helping customers save for their retirement. Of every €100 spent with the card, up to €1.5 is transferred to a retirement saving plan indicated by the user. The card is the result of synergies within the company – it is co-branded with Fidelidade Mundial, an insurance company that belongs to the CGD group.
Another card, in partnership with the Visabeira group, lets customers earn vouchers to claim discounts at companies owned by Visabeira, a company active in sectors like tourism and property in which CGD is a major shareholder.
University students, a segment in which CGD says it has a banking market share of 69 percent, is another underserved card market. CGD has signed agreements to issue cards for Universidade de Lisboa, Universidade de Coimbra and Universidade do Minho, three of the most important universities in the country. In addition to offering credit, students who have the card can also use it to access parking lots and libraries, thanks to a capacity to store up to 2KB of data for university purposes. Teachers and other staff members of the universities can also have cards issued for them.
Another key target market is small and medium-sized companies, a group which forms the core of the Portuguese economy. Due to its wide geographical spread and its links with the state, CGD is a traditional provider of banking services to these companies, but until recently it wasn’t offering them a corporate credit card.
The Caixaworks card is expected to fill this gap, as it can be used by the holder to help manage company cash flow and to have access to quick credit. The card can also be accompanied by a whole set of insurance products provided by other companies of the group.
Mendes believes there is room to grow in the market by using tools like these, as the use of credit cards in Portugal is still below the levels of other European countries. “Portugal’s card markets are not underdeveloped, but neither are we as developed as places like the UK,” he says. “Here, everybody has debit cards, but the penetration of credit cards is not too deep.”
CGD has issued some 4.5 million cards so far, of which almost 1 million are credit cards. But the gap between debit and credit cards in the company’s books is set to get narrower, he adds.
“We have long been the largest retail bank in Portugal, but we didn’t lead in the credit card market. So, in tune with Caixa’s strategy, we are making a great effort to become the number one in this segment as well. We should reach the top position by the end of the year,” he says.
He adds that new card products are in the pipeline already, though he will not reveal exactly what the plans are. A hint is that they will deal with the themes of insurance and sustainability. CGD will also soon launch its first prepaid cards.
The group reported consolidated 2007 net income up 16.7 percent to €856.3 million. Its retail banking operation accounted for €528.8 million of this income, up 15.6 percent over 2006.