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Co-Branded and Affinity Credit Cards in the U.S.
Market Report, May 2007, 3000  €


Description

Co-branding has entered its late adolescence and is a fixture of American marketing, and increasingly so, of the global payments industry.
There are literally thousands of co-branded and affinity card programs on offer.
According to some industry estimates, approximately 45% of the cards in the wallets of U.S.
consumers are co-branded or affinity cards.
The overall co-branded card market is larger than the affinity market in terms of number of accounts and outstandings.
However, the sheer number of affinity card programs dwarfs the number of co-branding cards because so many affinity programs tend to be small.With over three quarters of U.S.
adults (pretty much the entire credit worthy adult population) owning at least one credit and debit card, co-branded and affinity card marketers are seeking to fashion programs to attract new or under-penetrated consumer segments.
Thus card industry professionals are taking fresh looks at ethnic groups and at the affluent and at the other end of the scale the non-affluent and unbanked.
In most segments, airlines, hotels, organizations, the big customer lists have been thoroughly mined.
Co-branders are also trying to create programs that will capture the interest of consumers at significant life stages, teens, college students, new drivers, engaged couple, young married and mature adults, etc.
Similarly they are trying craft programs that will capture a lifestyle.
If the consumer has an interested, a passion, an event or desire, some issuer somewhere is trying to craft a program for it.Co-Branded and Affinity Credit Cards in the U.S.
focuses on the U.S.
market for co-branded and affinity cards, in which Packaged Facts estimates that by year-end 2006, roughly 30-60 million U.S.
consumers carried over 320 million co-branded and affinity credit cards, up from Packaged Facts estimate of 212.1 million in 2003.
Consumers used them in at least 9.4 billion transactions worth at least $849 billion.
The report provides an overview of the major market players; a survey of recent and ongoing litigation and regulation of the market; and market share of major issuers, as well as leading growth and marketing trends and an examination of their latest co-brand products and technology, particularly contactless technology.
Competitive profiles of the major card associations and top card issuers provide added insight into their recent activity and future plans, while data from Simmons Market Research Bureau paints a picture of card users, from demographics to opinions to card usage rates.What You’ll Get in this ReportCo-Branded and Affinity Credit Cards in the U.S.
makes important predictions and recommendations regarding the future of this market, and pinpoints ways current and prospective players can capitalize on current trends and spearhead new ones.
No other market research report provides both the comprehensive analysis and extensive data that Co-Branded and Affinity Credit Cards in the U.S.
offers.
Plus, you’ll benefit from extensive data, presented in easy-to-read and practical charts, tables and graphs.
How You Will Benefit from this ReportIf your company is already doing business in the co-branded and affinity credit card market, or is considering making the leap, you will find this report invaluable, as it provides a comprehensive package of information and insight not offered in any other single source.
You will gain a thorough understanding of the current market for co-branded and affinity credit cards, as well as projected markets and trends through 2011.
This report will help: Marketing Managers identify market opportunities and develop targeted promotion plans for co-branded and affinity credit cards.
>Research and development professionals stay on top of competitor initiatives and explore demand for co-branded and affinity credit cards.
>Advertising agencies working with clients in the banking and retail industries understand the product buyer to develop messages and images that compel consumers to use co-branded and affinity credit cards.
>Business development executives understand the dynamics of the market and identify possible partnerships.
>Information and research center librarians provide market researchers, brand and product managers and other colleagues with the vital information they need to do their jobs more effectively.

Sommaire
 
Chapter 1 Executive Summary

Players: Links in the Co-branded and Affinity Cards’ Value Chain
What Makes a Successful Co-Branding Program?


The Market
Consumer Payment Preferences
Table 1-1 Personal Consumption Expenditure (PCE) and Consumer Payments Methods, Share of Payment Volume, 2000, 2005 and 2010
Credit and Debit Cards in Force
Table 1-2 U.S. Credit and Debit Cards and Transactions, 2001-2005
Sizing the Co-Branded and Affinity Card Market
Table 1-3 Co-Branded and Affinity Cards: Cardholders, Card in Force, Number of Transactions and Volume, 2006
Are Co-Branded Cards Losing Front-of-Wallet Appeal?
Table 1-4 Consumers’ Preferred Credit Cards, 2000 vs. 2004 vs. 2006


The Consumer
Ownership and Use of Affiliation and Sponsored Credit Cards
One in Five U.S. Cardholders has an A/S Credit Card
Table 1-5 Consumer Ownership and Use of A/S Credit Cards by Type, 2006
A/S Cards Losing Share
Table 1-6 Trends in A/S Credit Card Ownership and Use (2004-2006)
Credit Card Debt
Delinquencies
Table 1-7 Past-Due Payment Patterns


The Competitive Arena
Network/Brand Size and Share
Table 1-8 U.S. Credit Card Market Network/Brand Shares as of June 30, 2006
Table 1-9 U.S. Credit Card Purchase Volume, First Six Months of 2006 vs. First Six Months of 2005
Figure 1-1 Brand/Network Compound Annual Growth Rate in Purchase Volumes, 2002-2005
Industry Consolidation


Market Developments
Rethinking Under-Penetrated Consumer Segments
Ethnic Marketing
Lifestyles and Life Stages
Global Initiatives
Sports Enthusiasts and Supporters: “Fan Experience” Rewards


Advertising and Promotion
Direct Mail: Offers Increase as Response Rates Continue to Decline


Legal Issues
Issuers Move to Counteract Identity Theft Epidemic
Supreme Court Rules that Over the Limit Fees are Not
Finance Charges
Going Forward
110th Congress Likely to Renew the Debate on Credit Card Reform


Where is Co-Branding Going?
Chapter 2 The Market


Consumer Payment Preferences
Table 2-1 Personal Consumption Expenditure (PCE) and Consumer Payments Methods, Share of Payment Volume, 2000, 2005 and 2010
Table 2-2 Consumer Payments Methods, Share of Transactions, 2000, 2005 and 2010
Table 2-3 Consumer Payment Preferences, 2005
Debit Cards Replacing Paper and Credit Cards in Retail Shopping
Table 2-4 In-Store Payments Mix, 1999-2005 (by percent)
While Consumers Cleve to Credit Cards on the Internet
Table 2-5 The Internet Payments Mix, 2005
More Consumers Using Plastic for Small Payments
Credit and Debit Cards in Force
Table 2-6 U.S. Credit and Debit Cards and Transactions, 2001-2005
Credit Card Market Becoming Saturated
Table 2-7 Credit Card Applications in Response to Direct Mail Offers (2000-2005)


The Co-Branded and Affinity Card Market
Partners and Programs
Sizing the Co-Branded and Affinity Card Market
Table 2-8 Co-Branded and Affinity Cards: Cardholders, Card in Force, Number of Transactions and Volume, 2006
Reward and Rebate Cards Drive the Co-Brand and Affinity Card Market
Table 2-9 Rewards Card Penetration, 2002-2005
Table 2-10 Characteristics of Rewards Cardholders
Co-Branded and Affinity Rewards
Are Co-Branded Cards Losing Front-of-Wallet Appeal?
Table 2-11 Consumers’ Preferred Credit Cards, 2000 vs. 2004 vs. 2006
Co-Branded Card Growth Drivers
Figure 2.1 Incidence of Co-Branded Credit Card Ownership and Co-Branded Credit Cards by Frequency of Credit Card Usage
Co-Branded Card Growth Forecast
Table 2-12 Co-Branded and Affinity Card Market, 2006-2011
The Global Co-Branded and Affinity Card Market
Private Label Conversions Fuel European Expansion

Chapter 3 The Consumer

About Simmons Data
Data Presented for 12 Credit Card Categories
Statistically Accurate Cross-Section of the U.S. Population
Index System
Ownership and Use of Affiliation and Sponsored Credit Cards
One in Five U.S. Cardholders has an A/S Credit Card
Table 3-1 Consumer Ownership and Use of A/S Credit Cards by Type, 2006
A/S Cards Losing Share
Table 3-2 Trends in A/S Credit Card Ownership and Use (2004-2006)
A/S Credit Cardholders: Older, Well Educated, Financially Secure, Married Homeowners
Non-Hispanic Whites and Asians Favor A/S Cards
Blacks and Hispanics are Resisters
Table 3-3 Demographic Characteristics Favoring Ownership and Use of A/S Credit Cards
A/S Cardholders Better Educated, More Affluent Then Regular Credit Cardholders
Table 3-4 Education—A/S vs. Regular Cardholders vs. U.S. Adults
Table 3-5 Education—A/S Cardholders by Marketer
Table 3-6 Household Income—U.S. Adults vs. All Cardholders vs. A/S
Table 3-7 Household Income—A/S Cards By Marketer
Table 3-8 Occupations—U.S. Adults vs. All Cardholders vs. A/S
Table 3-9 Occupations—A/S Cardholders by Marketer
A/S American Express Credit Cardholders
Table 3-10 Demographic Characteristics Favoring Ownership and Use of American Express A/S Cards
Factors Differentiating A/S American Express Cardholders
Table 3-11 Demographic Characteristics Favoring Ownership and Use of American Express A/S Cards, by Type
Travel Cardholders: Most Affluent, Concentrated in the Northeast
Affinity (Organization) Cardholders: Well-Educated West Coast Professionals or Techies
Automotive Cardholders: An Oddity
A/S Discover Credit Cardholders
A/S MasterCard Credit Cardholders
Table 3-12 Demographic Characteristics Favoring Ownership and Use of A/S MasterCard Cards, Overall
Factors Differentiating MasterCard A/S Cardholders
Table 3-13 Demographic Characteristics Favoring Ownership and Use of A/S MasterCard Cards by Type
Travel Card Users: The Most Affluent of All A/S Cardholders
Automotive Card Users: Modestly Well Off, Retired Males
Organization Cardholders: Comfortable Condo Owners
A/S Visa Credit Cardholders
Table 3-14 Demographic Characteristics Favoring Ownership and Use of A/S Visa Cards
Travel Card Users: More Affluent, Younger, Concentrated on the West Coast
Table 3-15 Demographic Characteristics Favoring Ownership and Use of A/S Visa Cards*, by Type
Affinity (Organization) Cardholders: Female, Younger, Single Professionals and Techies
Automotive Card Users: Older, Less Affluent, East Coast Professionals and Techies


Consumer Finances
Consumer Indebtedness Up, Savings Down (Again), Income Flat
Figure 3-1 Consumer Saving Rate, Saving as a Percentage of Personal Income, 1995-Q3 3006
Table 3-16 Household Debt Outstanding (billions of dollars; seasonally adjusted)
Credit Card Debt
Credit Card and the Financial Obligations Ratio (FOR)
Figure 3-2 Selected Components of the Financial Obligations Ratio (FOR), 1989-2005:Q2
Delinquencies
Table 3-17 Past-Due Payment Patterns
Table 3-18 Delinquency Rates, All U.S. Banks, Quarterly 1999-2006
Bankruptcy Filings
Table 3-18 Annual Non-Business Bankruptcy Filings by Chapter—1995-2005
Table 3-19 Quarterly Non-Business Bankruptcy Filings by Chapter—2002 (Q4)-2006 (Q2)
Chapter 4 The Competitive Arena


Overview
Network/Brand Size and Share
Table 4-1 U.S. Credit Card Market Network/Brand Shares as of June 30, 2006
Table 4-2 U.S. Credit Card Purchase Volume, First Six Months of 2006 vs. First Six Months of 2005
Figure 4-1 Brand/Network Compound Annual Growth Rate in Purchase Volumes, 2002-2005
Table 4-3 Share of Credit Card Outstandings Mid-year 2006 vs. Mid-year 2005
Table 4-4 U.S. General Purpose Credit Cards in Circulation and Card Accounts by Brand, Mid-2006 vs. Mid-2005
Bank Issuers
Table 4-5 Top U.S. Bank Visa and MasterCard Credit Card Issuers by Payments Volume and Outstandings, Plus American Express, Mid-year 2006
Table 4-6 Top Retailer Co-branded Visa and MasterCard Credit Card Issuers by Payments Volume and Outstandings, Mid-2006
Industry Consolidation
Table 4-7 Consolidation in the Credit Card Industry: Top 10 Credit Card Issuers by Outstanding Loans 1995 vs. 2005
Table 4-8 Consolidation in the Credit Card Industry: Top 10 Credit Card Issuers by Outstanding Managed Loans 2006
Industry Performance
Table 4-9 2006 Operating ROA by Product Type
Table 4-10 Return on Managed Loans Select Co-brand Issuers


Profiles and Strategies
MasterCard Worldwide: Rebranded and Restructured
Table 4-11 MasterCard Worldwide, U.S. Results Mid 2006
Table 4-12 Processed Transactions (in millions)
MasterCard’s Co-Branding Differentiators
A New Relationship Rewards Construct for 2007
Visa USA: Signature Platform Hosts Co-brand Programs
Table 4-13 Visa USA Quarterly Performance Data
Table 4-14 Visa’s Co-branded and Affinity Accounts
Co-Branded and Affinity Cards
Structuring Co-Branding Programs
Visa Differentiators
4-15 Examples of Visa Co-Branded Credit Card Programs
American Express: Network, Franchisor, Issuer, Partner
Table 4-16 American Express, Results Year-end 2006
Discover: Back in the Game, but About to Be Spun Off
Table 4-17 Discover, Selected 2006 Financials
Bank of America/MBNA: New Affinity Model
Table 4-18 Selected Bank of America Card Services Financials, 2005-2006 1
Table 4-19 Bank of America’s New Affinity Banking Model
JPMorgan Chase: Emphasis on Major Co-brand Partnerships
Table 4-20 Chase Card Services, Selected Financials, 2005 & 2006
Table 4-21 Sample of Chase Co-Branded and Affinity Card Categories
Choosing, Pricing and Promotion
Citigroup, Re-weighting Towards the International Consumer
Table 4-22 Citigroup Card Services, Select Financials, 2005-2006
Table 4-23 Citigroup Card Services, Key Indicators - Managed Basis (2) (in $ billions)
Juniper Bank/Barclaycard US: An Up-and-Comer
GE Money: Targeting Retail Conversions
Table 4-24 Dual Card Launches and Assets, 2003-2006
HSBC: Moving into Retail
U.S. Bancorp: A Strategy of Customization
Chapter 5 Market Developments and Product Strategies


Rethinking Under-Penetrated Consumer Segments
Capturing Affluent Consumers
Barclaycard (Juniper) and UBS Team with Rivals American Express and Visa to Get High Net Worth Consumers
Merrill+ Visa Issued by MBNA Bank of America Targets High Net Worth Consumers with a Tiered Benefits Program and Low APRs
Luxury Auto Makers Co-brand for their Customers
Table 5-1 Co-branded Luxury and Other Auto Cards
Barclaycard Also Goes After Boat Owners
U.S. Bank Targets the Corporate Jet Market
Casting a Wider Net
Diamond Financial Products Launches Two MasterCard Debit Cards
Affinity Introduced Secure Payroll Fund Debit Card
Los Angeles Grocery Chain “Super A Foods” Offers MasterCard Pre-Paid Debit Cards
American Dream Card LLC and HSBC Group PLC Offers Monthly Lottery as Cardholder Incentive
Ethnic Marketing
Lifestyles and Life Stages
Partnering with Olivia, Bank of America/MBNA Launches Co-Branded Affinity Card for the Lesbian Community
New Aetna Healthy Living™ Affinity Card Created with Bank of America, Targets the Health Conscious and Aetna’s 30 Million Members
Coalition Co-Branding for Would Be Insiders
Tying the Knot and Feathering the Nest
Targeting Teens and Students Causes Controversy
Alumni Cards Develop Reward Programs
Sports Enthusiasts and Supporters: “Fan Experience” Rewards
Bank of America Card Links Up With Pro Sports
Chase Card Services Multi-Sport Strategy
“ESPN Total Access Rewards VISA” Card Program: Grown by More Than 50,000 Members Since Its Launch
Canadian Football Gets its Own Card Set
Discover Aligns with WNBA
Airlines: Mature Category Looks to Stay Fresh
Co-Branding Goes Cruising
Co-Branded MasterCard for Cinema Enthusiasts
The Changing Retail Space
The Problems for Private Label
Table 5-2 Private Label Cards Declining Share of the Card Market, 2000-2005
The Co-Branding Pitch
GE Money Sets Dual Card Deals with Dillard’s, Meijer Stores
HSBC Teams with Boscov’s Department Stores to Launch Dual Card Programs
Alliance Data Systems Expands into Retailer Co-branding
Citigroup’s Been Active on the Retailer Co-branding Front
HSBC and MasterCard Win the Prized Saks Fifth Avenue Program
The HSBC/MasterCard Duo also Win Consumer Electronics Giant Best Buy’s Program
Barclaycard U.S. and Barnes & Noble Issue Member MasterCard
Petroleum Companies Offer a Portfolio of Choices
Co-Branding in the Workplace
Co-Branded Cross Selling
Global Initiatives
MasterCard Worldwide, a Leading Actor on the Global Co-branding Stage
American Express Expands into New Overseas Territories
Citicorp Eyes the International Consumer
Bank of America’s Overseas Strategies are Simple, and Include a Long-Term Interest in China
Home Grown Co-Brands
Chapter 6 Advertising, Promotion and Acquisition Channels


Direct Mail: Offers Increase as Response Rates Continue to Decline
Table 6-1 Number of Mailed Credit Solicitations and Response Rate (1990-2006)
Direct Mail: Growing or Shrinking?
Promoting Proprietary Rewards vs. Co-Branded Rewards Cards
Table 6-2 Percentage of Mailed Credit Card Solicitations Containing Rebate or Reward Offers (2001-2006)
Table 6-3 Consumer Attitudes Towards Solicitations and Consumer Financial Discipline
Table 6-4 Attitudes Regarding Opt-Out Law and Government Prohibition of Credit Card Solicitations, 2004
Telemarketing
The Search for Alternate Channels
Bank of America Restructures Channels, Cuts Origination Costs
Table 6-5 Bank of America’s Card Sales Mix By Channel
Chase Leverages Co-Branding Partners’ Channels
Table 6-6 JPMorgan Chase’s Card Sales Mix By Channel
Table 6-7 New Accounts, Chase Brand vs. Partner Cards
Citibank Pilots Branch Program
American Express Embraces a “Powerful and Emerging Channel—
the Web”
AmEx is into Events as Well as the Internet
Media Spending
Table 6-8 Advertising Spending in Measured Media by Top 5 Credit Card Issuers 2005)
Television Advertising
Table 6-9 Advertising Spending in Measured Media by Top 5 Credit Card Issuers (by Share of U.S. Market in 2005)
Print Advertising
Table 6-10 Top 2005 Card Ad Spenders by Media: Print
Co-Branded Credit Card Ad Spending
American Express
Table 6-11 AmEx Co-branded Ad Spending in Measured Media* (2003-2005)
Citigroup
Table 6-12 Citigroup’s Co-Branded Ad Spending in Measured Media* (2003-2005)
JPMorgan Chase
Table 6-13 JPMorgan Chase Co-branded Ad Spending in Measured Media* (2003-2005)
MBNA
Table 6-14 MBNA Co-branded Ad Spending in Measured Media* (2003-2005)
Advertising Intiatives
ESPN’s Media Splash Plus Attainable Rewards Draws 50,000
Customers
Bank of America Promote MLB Partnership with PR Blitz
Visa Takes “Life,” While MasterCard Became “Priceless”
Chapter 7 Legal Issues


Issuers Move to Counteract Identity Theft Epidemic
Table 7-1 Top Identity Theft Targets (Total Incidents, 2001-2003)
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Table 7-2 Annual Non-Business Bankruptcy Filings by Chapter, 1995-2005
Key Provisions
Means Test
Write Off and Recovery
Debt on Secured Personal Property:
Payment Plan Period
Debtor Obligations:
Filing Fees:
Collection
Credit Counselor Liability and Audits
Consumer Protection
Table 7-3 Definitions of Bankruptcy
Anticipated Impact
Impact of the BAPCPA as of Q4 2006
Table 7-4 Quarterly Non-Business Bankruptcy Filings by Chapter—2005- Q2, 2006
Federal Reserve Report on Act’s Impact
Bottom Line for the Credit Card Industry
What Consumer Know and Think of Mandatory Disclosure
Requirement
Costs and Correctness Most Important on Periodic Statements
Consumers Rank Interest Rates Info Most Helpful on Credit Card Solicitations
Table 7-5 Credit Card Solicitations: Opinions on Helpfulness of Disclosure Information, 2004
Supreme Court Rules that Over the Limit Fees are Not Finance
Charges
Going Forward
110th Congress Likely to Renew the Debate on Credit Card Reform
States Expected to Attack Universal Default Clauses
Merchant Antitrust Litigation on Interchange
Chapter 8 The Future of Co-Branding


Where is Co-Branding Going?
New Co-Branding Frontiers: Healthcare, Virtually Virgin Territory
Blue Cross/Blue Shield Co-branding Visa Debit Card
Blue Healthcare Bank
Bank of America and MedImpact—Co-branding & Affinity Banking Meet Healthcare
UnitedHealth Group’s Exante Bank and Debit Card
WellChoice of New York and American Express Issue Debit Card
In India, Citibank Pioneers Co-branded Insurance Card with Healthcare Benefits
Co-Branded Rewards for Managing Prescription Drug Costs
Small Business
Co-Branded Debit Cards
Contactless Technologies—The Great Enabler
An Assortment of Contactless Cards
Payments Industry Promotes Contactless
Contactless Co-branding Sports Leads the Way
Merchants Embrace RF and POS
Figure 8-1 Spending at Quick Service Restaurants, Cash versus Plastic
JPMorgan Chase Commits to Contactless
Promising Future for Contactless Signature Visa
Enhanced Card Technology
Directions and Projected Trends in Digital Display Technology
Developing Technologies for Smart Card Display
A Variety of Smart Card Developers
Next: Contactless Payment via Mobile Phone
Birth of the Credit-cum-Membership Card: Technology Enables Automatic Affinity Discounts
On-Line Fraud and Identity Protection
Small Payments…and Smaller Payments
Table 8-1 Small Payment Market Potential
Wither Rewards Programs?
Rewards, Less Bank for the Buck
Costs of Reward Programs Are Soaring
New Rewards Constructs
Soft Benefits
Experiential and Other Unique Rewards
Merchant Discounts
New Rewards
Proprietary Bank Programs versus Co-branded and Affinity Programs
Integrating Proprietary Bank Rewards and Co-branding
Best Practices
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