NEWS DIGEST
RBS targets overdrawn current account
holders…
Go deeper with GlobalData
La Caixa takes Fortis’s 50% stake in
CaiFor…
Santander expansion plans for Latin
America…
The Amex Travel Funds card, which was later renamed the
Travelers Cheque Card, was launched in 2003 and was intended to
replace Amex’s hugely popular paper traveller’s cheques, but it
appears that Amex underestimated how popular paper cheques were.
Amex spokesman Robert Sherman said: “We found that travellers had a
very strong affinity to the tried-and-true paper Travelers Cheque
and were resistant to converting to a plastic version.”
Amex is also bowing out of the health care payment card business,
although it has not yet made a public announcement. According to
the company, the health care card market is not moving as quickly
as anticipated and does not justify the significant levels of
investment needed to move the business forward.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataProduct innovation
RBS targets overdrawn current account holders
Royal Bank of Scotland’s English subsidiary, NatWest, is launching
a current account aimed at customers who frequently go overdrawn
and end up paying regular unauthorised overdraft fees. In an
interview with the Financial Times newspaper, Gordon Pell,
chief executive of retail markets at RBS, said that the account is
in response to growing consumer discontent over unauthorised
overdraft fees.
NatWest will offer the product to the minority of its 12 million
customers who repeatedly go overdrawn and incur charges that can be
as high as £38 ($76) per incident. The bank plans to write to such
customers offering a new account whereby they would pay a fee of
£10 a month but then pay lower unarranged borrowing fees of £17 a
time.
Pell estimated that more than 100,000 of its customers would pay
less under this system. “We are going to start writing to the
customers who might benefit from this, offering them a choice to
move to this account. There is no compulsion,” he told the
newspaper.
Bancassurance
La Caixa takes Fortis’s 50% stake in CaiFor
Benelux bancassurer Fortis and Spain’s La Caixa have signed a deal
in which La Caixa will acquire all of Fortis’s interests in their
pioneering Spanish bancassurance joint venture, CaiFor, for a total
cash consideration of €980 million ($1.35 billion). In 2006, CaiFor
reported consolidated gross income of €1.72 billion and Fortis’s
share in net earnings amounted to €56 million.
Jacob Westerlaken, CEO Fortis Insurance International Europe, said:
“Since its inception in 1992 Fortis and La Caixa have together
built a leading bancassurer in Spain. This partnership – the first
of its kind in European financial services – enabled us to launch
what has now become an internationally recognised model of
successful bancassurance.
Fortis remains fully committed to the Spanish market, both in
banking and insurance, and to our international bancassurance
strategy.”
Strategy
Santander expansion plans for Latin America
Spain’s Santander has said it will open 1,000 new branches, create
6,000 jobs and invest $2 billion in its Latin American operations
under its three-year regional business plan, Plan America
2010.
Speaking at the Santander-Latin America Convention on 5 July,
Francisco Luzón, director and general manager of the banking group,
said that the four main pillars of the initiative are: organic
growth, with more branches and other distribution channels; the
extension of the use and profile of the Santander brand; a new
technology drive in which $1 billion will be invested in IT; and
the strengthening of the sales and commercial side of the
organisation.
The plan involves major investment in the growth of the bank’s
distribution footprint, with the opening of 945 new offices and
points of sale, which will bring the network at the end of 2009 to
5,015 distribution points. Additionally, 5,000 new ATMs will be
installed, bringing the total to 20,000.
Mergers and acquisitions
Société Générale aims for control of Rosbank
According to a report from newswire service AFP, Société
Générale plans to buy a controlling stake in Russia’s Rosbank. The
French bank has requested authorisation for the purchase of an
additional 30 percent plus two shares in Rosbank, a spokeswoman for
the Russian bank, Olga Tsaregorodtseva, told AFP. She said
that the price agreed was $1.7 billion.
Société Générale confirmed that a request for a purchase of shares
had been made to Russian authorities. It currently owns 20 percent
minus one share in the Russian bank; Russian holding company
Interros owns 69 percent. The planned purchase would give the
French bank a 50 percent plus one share stake in Russia’s
seventh-largest bank by assets.
Strategy
GE to sell WMC Mortgage business
General Electric (GE) has indicated it is selling the WMC Mortgage
subprime lending business that it bought in 2004. The sale was
confirmed in GE’s second-quarter results, which showed overall net
earnings of $5.42 billion, up 9.6 percent from the second quarter
of 2006.
“For the quarter, GE Money had strong global growth in revenues and
assets, and increased segment profit 8 percent despite a loss at
its US mortgage business, WMC,” said GE Chairman and CEO Jeff
Immelt. “We have made the decision to exit this business and
substantially reduced our exposure by selling $3.7 billion of WMC
loans in the quarter.”
GE’s move to dispose of WMC comes as more than 60 mortgage
companies have halted operations, gone bankrupt or sought buyers
since the start of 2006, according to a survey by
Bloomberg news service.
Profit at GE’s consumer finance unit rose 8 percent on a 17 percent
revenue increase.
Strategy
BankWest in major expansion drive
BankWest, the wholly owned subsidiary of the UK’s HBOS group, has
announced plans to open more than 160 new branches across key
Australian areas in a move to challenge the market dominance of
Australia’s big four banks. BankWest has grown steadily over recent
years and is now the country’s sixth-largest banking group by
assets.
More than 125 retail branches are to be opened and another 35
branches will focus purely on business customers. Approximately
3,000 new jobs will be created, increasing the existing workforce
by 60 percent. HBOS Australia CEO David Willis said: “We have
challenged the status quo with a number of innovative products and
services, attracting thousands of customers from across Australia.
This initiative offers customers a real alternative to the Big Four
and a better deal.”
A new suite of products will be unveiled when the roll-out
commences in the last quarter of this year, complementing
BankWest’s well-established broker network and successful direct
business, added Willis.
Strategy
Capital One announces $700m costs cut drive
Capital One has announced a broad-based cost-cutting initiative to
reduce operating expenses and improve the company’s competitive
position. The plan is expected to reduce its operating expense
structure by approximately $700 million pre-tax, with $400 million
realised in 2008 and $300 million in 2009.
Examples given by Capital One of expected actions include
consolidating operations and platforms across similar product
groups; consolidating overlapping functions across line and staff
units; reducing layers of management; aggressively managing
vendor/supplier spending; and continued rationalisation of
technology spending.
Around $150 million is related to severance benefits, as the
initiative is expected to eliminate 2,000 jobs across the
company.
In early July Capital One announced that the CEO of its North Fork
banking operation, John Adam Kanas, will step down as head of
banking operations and resign from its board. The Virginia-based
company will take a $27 million second-quarter charge to hasten the
vesting of equity awards to Kanas and John Bohlsen, a former North
Fork vice chairman who is stepping down as head of commercial
banking.
Segmentation
Barclays rolls out non-resident Indian banking service in the
UK
Two months after launching a substantial retail banking operation
in India itself (see RBI 573), Barclays, the UK’s
third-largest retail bank, has now launched a suite of specially
designed products for non-resident Indian (NRI) customers in the
UK.
NRI customers will be able to visit one of over 50 Barclays
branches in and around London and access, among other products, two
types of savings accounts: the Non-Resident External Savings
Account, which enables customers to manage all their basic rupee
transactions in India using their overseas earnings in any foreign
currency; and the Non-Resident Ordinary Savings Account, which
allows them to manage their rupee income in India.
Both accounts come with a mandate facility to allow designated
individuals in India to manage the account jointly with the holder,
free ATM cards for both the account and the mandate holder, free
cheque books and free pay orders from India. Barclays says it will
extend NRI banking services to more than 70 branches in large
cities across the UK from early August.
Credit cards
Citi survey looks at Asia-Pacific card usage
A report by Citi on credit card usage in seven countries across
Asia-Pacific, including Australia, has concluded that, on average,
Australians have 2.1 cards each, the lowest in the survey. At the
other end of the scale, Malaysians have an average of 3.26 cards,
with 84 percent of the population owning three credit cards.
Australians are heavy credit card users – they use their cards an
average of 5.4 times per week. Twelve percent of Australians use
their card 11 or more times per week and 3.5 percent use them more
than 20 times per week. In contrast, in India and Indonesia, 60
percent of people use their card only once or twice per week.
In terms of online usage, South Koreans used their credit card
online an average of 7.8 times in the last six months compared with
5.6 times for Australians. In Indonesia the average was two and in
Hong Kong it was 2.4. Credit card spending on big ticket items is
the norm in China: 58 percent of respondents there say they buy
only big ticket items with their card. In Australia, this figure
was 17 percent.
Repayment habits differ between countries. In South Korea, 81
percent of respondents say they pay off their card in full each
month. Australians and Malaysians show a similar pattern of
repayment with a fairly even split between revolvers and
transactors. Across the seven countries, 42 percent carry an
ongoing card debt.
Joint ventures
Deutsche Bank and Hua Xia Bank start Chinese card
service
Germany’s Deutsche Bank and China’s Hua Xia Bank have launched a
credit card joint venture in China, a significant milestone for the
European bank in the Chinese market. The move comes one year after
Deutsche bought a 9.9 percent stake in the Chinese lender, granting
it a seat on Hua Xia Bank’s board.
Colin Grassie, CEO of Deutsche Bank Asia-Pacific, said: “Both
Deutsche Bank and Hua Xia Bank have brought complementary skills
and strengths to this venture – it has been a mix of international
expertise and experience, technical capability and local market
knowledge. This further extends the range of our global financial
products and services that are available in the rapidly expanding
China market.”
Three different classes of the Hua Xia credit card are being
offered: Classic, Gold and Titanium. All the cards include 72-hour
credit card loss protection as well as a feature called Big
Purchase, Small Repayment, by which cardholders can pick up one
major transaction within the first three months and pay it back in
interest-free instalments.
Bancassurance
Aviva and MDM Bank in Russian bancassurance
tie-up
Aviva, the world’s fifth-largest insurance group, has reached a
bancassurance agreement with MDM Bank, a leading retail bank in
Russia. Aviva will provide insurance coverage for MDM cardholders
as well as offer life insurance and savings products to bank
customers. The service will start on 1 September.
The deal is the latest in a line of bancassurance tie-ups – the
tenth this year alone – for the UK insurance giant (see RBI
574).
MDM Bank is one of the largest Russian privately owned financial
institutions, with a wide distribution network and a broad customer
base. Starting from Moscow, MDM Bank will give Aviva access to its
network of over 100 branches located in nearly 40 cities across
Russia.
Julia Topolskaya, head of retail banking at MDM, said in a
statement: “We plan to develop differentiated insurance offers to
all our customer segments.”
Strategy
Around 20,000 First Direct accounts closed
Six months after it started charging customers £10 ($20) a month if
they did not maintain a balance of at least £1,500, HSBC’s direct
banking subsidiary, First Direct, has reported that almost 20,000
customers have closed bank accounts. At the time the move was
announced (see RBI 563), First Direct, which has 1.2
million customers, said the charge could affect an estimated
195,000 people (15 percent of its customer base). Around one in ten
of these customers have since left the bank rather than pay the
charge.
The fee was waived if customers deposited more money in the
account, opened a savings account or bought products such as home
insurance or loans from the internet and telephone bank. “What we
have seen is a significant number of customers in that [15 percent]
group have made changes in their current account and put more money
in to achieve the balance,” said Chris Pilling, chief executive of
First Direct.
When the charge was introduced, Pilling said: “I want to focus our
efforts on our most important customers: those who use us as their
main bank or who have a number of products with us. Many of our
customers do not enjoy the full benefits as they use us for a
secondary account.”
MARKETIND NEWS DIGEST
Loyalty
Citi says ThankYou to Smith Barney clients
Citigroup (Citi), the US’s largest bank, has extended its ThankYou
rewards programme to clients of its brokerage Smith Barney.
Initially, Smith Barney will offer the no-fee rewards scheme to
clients with a financial management account (FMA), who will receive
one ThankYou point per dollar spent on purchases made with their
FMA card. There is no upper limit on the points clients can earn
and no expiration date.
Smith Barney joins Citibank, Citi cards and online travel agent
Expedia.com as ThankYou sponsors. More than 11 million customers
have enrolled in the rewards scheme.
The initiative follows renewed efforts by Citi to exploit
cross-selling opportunities across its vast franchise. Smith Barney
has been cross-selling retail banking products while the group’s
home equity arm has been pushing Citi Cards and Smith Barney
service, and vice versa.
One of the big trends in US retail banking during the past few
years has been the introduction or enhancement of loyalty schemes
from the country’s banks. Citi’s ThankYou initiative, launched in
2004, is one of the most established loyalty programme in the
market.
The bank has calculated that the attrition rate of customers
enrolled in ThankYou is one-fifth that of customers who elect not
to join the scheme.
Cards marketing
Chase expands Clear & Simple plan
Chase, the third largest US retail bank, has announced an expansion
of its Clear & Simple communications programme, designed to
help its customers better understand and manage their accounts,
with the launch of an online site http://www.chaseclearandsimple.com/.
The bank is offering an incentive to encourage its credit
cardholders to manage their credit card accounts more effectively
and to pay their bills on time, by giving a $10 credit when
cardholders sign up for free alerts, automated bill payments and
online statements.
According to Chase, it wants to increase transparency with
easy-to-understand communications and empower and educate its
credit card customers to avoid late fees and maintain the best
available interest rate.
Cards marketing
India’s ICICI Bank offers jewellery card
India’s largest private-sector bank, ICICI, has teamed up with
leading local jewellery manufacturer and retailer Gitanjali Group
to launch the Jewellery credit card. Cardholders will be entitled
to a discount of 5 percent on purchases of jewellery up to
INR10,000 ($247) and a discount of 7.5 percent on purchases in
excess of INR10,000 at Gitanjali outlets.
The card has no annual cardholder fee for life, as well as a
loyalty scheme that gives customers eight reward points per INR200
spent on purchases at Gitanjali stores. “The number of jewellery
buyers is ever increasing and we need to cater to this segment by
providing a greater range of purchase and lifestyle benefits,” said
Sachin Khandelwal, head of ICICI’s cards group.
ICICI has more than 8 million credit card customers and has
predicted strong growth in customer numbers and card transactions.
“We expect a 25 percent growth in the credit card business,” said
Khandelwal.
Branding
Tendulkar bats for Aviva in India
UK insurance group Aviva, the world’s fifth-largest insurer, has
signed up former Indian cricketer Sachin Tendulkar as its brand
ambassador for the Indian market, as it looks to expand into the
region’s high-growth insurance markets. Last year its Asian
portfolio grew 91 percent, largely through bancassurance tie-ups
with local banks, such as its deals with Doha Bank, Indusind Bank
and a number of local co-operatives (see RBI 574).
Launching a new savings plan for parents, Bert Paterson, managing
director, Aviva India, said: “Our new product is a tribute to our
brand ambassador and we are happy to launch a product that serves
the future of India. We will be launching a nationwide campaign
featuring Tendulkar [who] embodies Aviva’s values and we are
certain that the association with him will be beneficial for the
company’s image.”
Celebrity endorsement is a popular marketing tool in India, as
illustrated by ICICI Bank’s employment of Indian actor Shahrukh
Khan as an international brand ambassador and Deutsche Bank signing
up last year two of India’s sports legends – former cricketer Sunil
Gavaskar and tennis icon Sania Mirza – to act as product
ambassadors in India.
Remittances
Emirates Bank introduces global remittances
scheme
Emirates Bank, the second-largest bank in the United Arab Emirates
(UAE), has introduced a global remittance service designed to
enable transfers to and from any country using multiple channels
and locations.
According to the bank, the new facility will appeal particularly to
the large numbers of unbanked blue-collar workers in the UAE by
offering an instantaneous and secure platform to remit funds and to
pay local and international bills. The service will be available
through a variety of channels including mobile phone text
messaging, call centres and ATMs.
“We have received interest from various employers, merchants and
government agencies to tie up with this service and create a truly
unique all-in-one payment card that can be easily recharged at
hundreds of locations across the UAE. We intend to extend this
service to not just our customers but also other banks in the
region to enable them to take advantage of our economies of scale,”
said Jamal Bin Ghalaita, the bank’s general manager, consumer
banking.
Mobile banking
Nedbank kicks off free mobile banking
Nedbank, South Africa’s fourth-largest bank, has introduced mobile
banking services including balance enquiries, account transfers,
third-party payments and pre-pay mobile phone top-ups. In an
attempt to boost take-up of the new mobile banking facility,
Nedbank customers will not be charged to use the service for the
first 12 months following its launch. Mobile phone usage has a high
penetration in the country: recent estimates suggest that more than
32 million South Africans own a mobile phone.
“Nedbank is aggressively promoting this as a banking channel to
reach those people in remote areas, in line with its commitment to
reach unbanked South Africans,” said Lee Albertyn, head of virtual
channels at the bank.
Promotional Campaign
MasterCard offers ‘dream’ baseball prize
MasterCard has rolled out a promotion in the US that offers its
cardholders the chance to win a week with their favourite Major
League Baseball (MLB) team.
The programme, MasterCard Presents MLB Dreams, gives the
competition winner access to MLB games, batting practice, VIP
seating and the chance to meet MLB star players.
A TV ad campaign to highlight the promotion kicked off on 2 July
and runs until mid-September. In addition, MasterCard will hand-out
30 million inserts at MLB stadia and augment the marketing effort
with ATM and print ads, mobile phone text messaging and an online
campaign.
