Abstract
This report focuses on the challenge of customer retention in the credit card industry. Mintel discusses consumer attitudes about rewards programs and outlines opportunities for issuers to maximize profitability by focusing on their existing customer base.
The saturation of the credit card market together with the increasing costs of customer acquisition are leading credit card issuers to concentrate more on existing customers. These efforts reduce “churn rates,” (the number of customers that stop using their cards), increase the profitability of existing customers. Mintel' s research has found that card companies are using any of several methods to accomplish retention goals:
- Creating rewards that have “soft” benefits making it easier to use the card, such as payment reminders or cash back for good credit management
- Making it easier for customers to earn rewards, either by lowering the number of points or miles needed or by offering more opportunities to earn points or miles
- Cross-selling products and allowing customers to earn points or miles by participating in or purchasing other products
- Increasing focus on relationship banking, making the credit card one of several products tying a customer to a particular financial institution
Mintel' s specialized consumer research shows that retention depends on creating messages and rewards attractive to individual segments. This report identifies divergent behavior among various segments, showing the most potential in teens, students, Hispanics, small businesses, and the “unbanked. ” Mintel also outlines several strategies to increase reward redemption, critical to customer retention.
Table of Contents
- Scope and Themes
- What you need to know
- Scope of this report
- Abbreviations and terms
- Abbreviations
- Terms
- Executive Summary
- Industry snapshot
- Current marketing trends
- The credit card consumer
- The consumer by income and risk score
- Competitive landscape
- Recommendations
- Market Drivers
- Consumer and credit card debt
- Figure 1: Total U.S. transaction volume, fiscal year ending September 30, 2004
- Rewards card usage
- Figure 2: Type of cards typically used, 2003 and 2007
- Figure 3: Type of "special" cards typically used, 2003 and 2007
- Payment behavior
- Figure 4: Consumer payment systems, by method of payment, 2000-08
- Figure 5: Number of cardholders and cards, spending and outstanding debt, 2000-08
- Figure 6: Payment behavior, October 2007
- Figure 7: Payment behavior, by age, October 2007
- Challenges to retention
- Non-redemption
- Figure 8: Preferred rewards, August 2006
- Commoditization of rewards programs
- Market saturation
- Figure 9: Frequency of application for credit card(s), by income, February 2006
- The economy
- Figure 10: Credit card charge-offs, 2006
- Figure 11: Credit card charge-offs, January-September 2007
- Marketing trends
- Interchange rates
- Competitive Landscape
- Card Issuer size
- Figure 12: Top ten issuers of general-purpose credit cards, year-end 2006
- Figure 13: Credit card issuers ranked by receivables, year-end 2005 and 2006
- Market share and usage
- Figure 14: Market share ranked, by major card type, year-end 2006
- Figure 15: Card usage, by card type, 2001 and 2007
- American Express
- MasterCard
- Visa
- Discover
- Current usage
- Figure 16: Issuers of cards used most often, by gender, October 2007
- Figure 17: Issuers of cards used most often, by age, October 2007
- Figure 18: Cards used most often, by income, October 2007
- Customer satisfaction
- Figure 19: Credit card customer satisfaction, June and July 2007
- Customer satisfaction--Rewards programs
- Figure 20: Perceived impact and influence of rewards programs, by demographic categories, April 2007
- Figure 21: Financial services behavior in the past 12 months motivated by rewards, April 2007
- Cross-selling
- Balance transfers
- Figure 22: Average promotional offer APR (%), Q1 2004-Q1 2007
- Figure 23: Promotional offer length (months), Q1 2004-Q1 2007
- Balance transfer check mailings
- Convenience checks
- Targeting the unbanked
- Small businesses
- Figure 24: Rewards valued by small business owners, 2007
- Figure 25: Rewards offered to businesses, by company, Q2 2007
- Reward preferences
- Figure 26: Examples of credit card rewards offerings, by age, June 2007
- Figure 27: Reasons for choosing a particular card, by income, October 2007
- Debit rewards programs
- Loyalty-focused reward trends
- Non-reward rewards
- Innovations in rewards programs
- Instant rewards
- In-house redemption
- Other programs
- Direct mail promotional activity
- The Credit Card Consumer
- Number of cards used
- Figure 28: Number of cards used in the last 60 days, by gender, October 2007
- Figure 29: Number of cards carried, by age, October 2007
- Figure 30: Number of cards carried, by income, October 2007
- Figure 31: Number of cards carried, by race/ethnicity, October 2007
- Reasons for using a specific card
- Figure 32: Reasons for using a specific card, by gender, October 2007
- Figure 33: Reasons for using a specific card, by age, October 2007
- Figure 34: Reasons for using a specific card, by income, October 2007
- Figure 35: Reasons for using a specific card, by race/ethnicity, October 2007
- Growth of debit cards
- Figure 36: Debit card holders, 2000-08
- Figure 37: Payment methods for transactions of varying sizes, 2007
- Figure 38: Users of debit reward cards, by age, 2006
- Debit card rewards
- Figure 39: How rewards would increase debit card usage, 2006
- Marketing for retention
- Balance transfers
- Figure 40: Credit card payment behavior, by age, October 2007
- Figure 41: Credit card payment behavior, by income, October 2007
- Figure 42: Credit card payment behavior, by race/ethnicity, October 2007
- Figure 43: Balance transfer activity, by race/ethnicity, October 2007
- The Credit Card Consumer with Risk Score and Investable Assets
- By risk score
- Figure 44: Investable assets, by self-reported risk score, September 2007
- Figure 45: Number of times checked risk score in the last 12 months, by self-reported risk score, September 2007
- Figure 46: Number of general-purpose credit cards used in the last 60 days, by self-reported risk score, September 2007
- Figure 47: Reason for using primary card, by self-reported risk score, September 2007
- Figure 48: Credit card payment behavior, by self-reported risk score, September 2007
- Figure 49: Change in credit card payment behavior, by self-reported risk score, September 2007
- Figure 50: Response rate, HELOC usage, balance transfers, and credit card offer comparison behavior, by self-reported risk score, September 2007
- By investable assets
- Figure 51: Number of general-purpose credit cards used in the last 60 days, by investable assets, September 2007
- Figure 52: Reason for using primary card, by investable assets, September 2007
- Figure 53: Credit card payment behavior, by investable assets, September 2007
- Figure 54: Change in credit card payment behavior, by investable assets, September 2007
- Figure 55: Response rate, HELOC usage, balance transfers, and credit card offer comparison behavior, by investable assets, September 2007
- Advertising and Promotion
- Direct mail
- Figure 56: Top ten debit card direct mail companies, 2004-06, ordered by 2005 volume
- Internet
- Figure 57: Percentage of adults online, by gender, age, race/ethnicity and income, 2007
- Increased segmentation in marketing
- The affluent
- Teens
- Figure 58: Bank product ownership, by age, 2007
- Figure 59: Teenagers who have used a credit card in the past 12 months, by type of transaction, by age, 2006
- Graduate students
- Marketing to graduate students
- Generation Plastic
- Figure 60: Share of dollars spent using plastic, by age, August 2006
- Future Trends
- More targeted marketing, less mass mailing
- Increased electronic marketing
- Increasingly sophisticated technology
- Creativity in rewards programs
- Relationship banking
- Small business rewards
- Appendix: Advertising and Promotion
- Figure 61: Banco Popular debit card mailing, September 2007
- Figure 62: American Express email retention mailing, 2007
- Figure 63: Washington Mutual direct mail retention mailing, 2007
- Figure 64: Visa Print ad in the San Jose Mercury News, September 2007
- Figure 65: American Express reward Print advertisement, 2007
- Figure 66: Visa check card experiential rewards advertisement, 2007
- Figure 67: Example of reminder email from Orchard Bank/HSBC
- Figure 68: Capital One rewards redemption reminder, October 2007
- Figure 69: Citi Dividend Platinum Select card balance transfer direct mail advertisement, October 2007
- Figure 70: Wells Fargo/PG&E debit card direct mail advertisement, 2007
- Figure 71: Discover credit limit increase notification letter, October 2007
- Figure 72: Southwest Bank Platinum check card, July 2007
- Figure 73: American Express/Costco co-branded card, October 2007
- Figure 74: Union Bank debit direct mail advertisement, 2007
- Figure 75: Eagle Federal Credit debit rewards card print advertisement, 2007
- Figure 76: Visa debit card print advertisement, 2007
- Figure 77: College reward Visa card mailed in February and March 2007
- Figure 78: Chase convenience check mailing, April 1007
- Figure 79: Union Bank convenience check mailing, August 2007
