Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Key trends in the Australian payment card market 2
Payment card use has increased over the last five years 2
Debit cards have become increasingly popular for small value transactions 2
Profiling the Australian credit card consumer 2
Most Australian consumers have a relationship with a credit card provider 2
Credit card spending has remained firm despite the economic downturn 3
Card-based payment methods are popular for a range of transactions 3
Most cardholders are satisfied with their credit limit and pay off their entire monthly balance 3
Drivers of customer acquisition and retention are changing 3
Credit card customers can be grouped in three basic segments 4
Competitor focus 4
CBA is the market leader when it comes to household credit card outstanding balances 4
Ascendant players have gained market share over the last five years 4
Visa and MasterCard face increasing competition from American Express 5
Product focus 5
Cards can be broadly categorized by fees and rates 5
Rewards are largely determined by annual fees 6
The major issuers focus on different product types 6
Card profitability is cresting 7
Credit card fees are an important revenue stream 7
Future focus 7
In the long term, increased debt aversion will lead to decreasing overall leverage 7
As the economy picks up competition will increase 7
Technological developments will create new battlegrounds 8
Positive credit reporting may make credit card applications easier to evaluate 8
It will become harder to charge fees 8
The discussion regarding interchange fee regulation continues 8
Table of Contents 9
Table of figures 10
Table of tables 11
Key Trends in the Australian Payment Card Market 12
Payment card use has increased over the last five years 12
There are almost 15 million credit and charge card accounts in Australia 12
Average transaction value per account and average spend per transaction has increased slightly 13
Increasing number of cards and transactions have driven the increase in card usage 14
Repayments have increased over the last several years 15
Outstanding balances have recently leveled off 17
Credit limits have increased but show slowing growth 19
Debit cards have become increasingly popular for small value transactions 20
Debit card transaction value has grown strongly over the last several years 20
The average value per debit account has soared but not the average value per transaction 21
Scheme debit cards have recently become common 23
Debit card usage has outstripped the growth in credit card usage 25
Profiling the Australian Credit Card Consumer 28
Most Australian consumers have a relationship with a credit card provider 28
Almost three-quarters of consumers have a credit card 28
Consumers generally stay with their main card provider for more than five years 29
Bankwest and St.George have the highest proportion of relatively new cardholders 30
Debit cards are a popular alternative for those without credit cards 31
Brand market share of main cardholders has shifted 33
The major banks have captured a larger share of main credit cardholders 34
Credit card spending has remained firm despite the economic downturn 35
The median cardholder spends between A$500 and A$999 a month on their main credit card 35
Card-based payment methods are popular for a range of transactions 37
Secondary cards are commonly used to separate different kinds of expenses 38
Most cardholders clear their balances in full and are fine with their credit limit 39
The median credit limit on cardholder's main credit card is between A$5,000 and A$9,999 39
Most cardholders are fine with their credit limit 40
Around half of cardholders habitually transact rather than revolve 41
American Express cardholders are the most likely to be transactors 42
Out of the cardholders questioned, 40% never pay interest on their main credit card 43
Drivers of customer acquisition and retention are changing 44
Credit card customers can be grouped in three basic segments 44
Most credit cards are arranged face-to-face 47
Bankwest cardholders are especially likely to have used the company website for information 50
Reward schemes are no longer a key driver of customer acquisition 51
CBA cardholders are especially likely to have been cross-sold their card 53
Pricing has become the most important factor for customer acquisition 54
Current cardholders are most likely to switch card provider to avoid the card fee 56
Cardholders have become less satisfied with their main credit card provider 58
Bankwest has the highest proportion of very satisfied cardholders 59
Competitor Focus 62
Five institutions hold the majority of outstanding credit card balances 62
CBA is the market leader when it comes to household credit card outstanding balances 62
Ascendant players have gained market share over the last five years 63
Citibank has built a unique position challenging the majors 66
Visa and MasterCard face increasing competition from American Express 67
Visa and MasterCard currently have a dominant market position 67
The major banks are issuing American Express companion cards 68
Product Focus 71
Fees, rates and features define credit cards 71
Cards fall into a narrow band categorized by fees and rates 71
The higher the annual fee, the greater the reward earn rate 72
Balance transfer options are a common tool for customer acquisition 73
The major issuers focus on different product types 74
The seven major card issuers cover most target segments 74
Most major card issuers have products with lower fees and rates 75
The mid-price segment includes the bulk of major issuers' cards 76
Most issuers have cards targeting the premium segment 77
Card profitability is cresting 78
Margins on credit card products have increased 78
Credit card fees are an important revenue stream 79
Future Focus 81
Conditions in the card market are set to become more difficult 81
In the long term, increased debt aversion will lead to decreasing overall leverage 81
As the economy picks up, competition will increase 82
Price conscious 82
Mainstream 82
Premium 83
Technological developments will create new battlegrounds 83
New card types will increase competitive pressures 83
Positive credit reporting may make credit card applications easier to evaluate 84
It will be challenging to maintain card profitability in the future 84
It will become harder to charge fees because of the rise of fee-free banking 84
Australian consumers have become savvier at transacting 85
The discussion regarding interchange fee regulation continues 85
APPENDIX 87
Data tables 87
Key trends in the Australian payment card market 87
Profiling the Australian credit card consumer 96
Competitor focus 109
Product focus 115
Further reading 117
Ask the analyst 117
Datamonitor consulting 117
Disclaimer 118
List of Tables
Table 1: Payment card metrics over time, May 2005-May 2009 2
Table 2: Outstanding balances on the books of banks (A$bn), June 2004-June 2009 5
Table 3: In the 12 months ending May 2009 credit and charge card transactions totaled A$220 billion, May 2004-May2009 15
Table 4: The number of debit card transaction has increased sharply, May 2004-May 2009 23
Table 5: Payment card metrics over time, May 2005-May 2009 26
Table 6: Payment card metrics over time, May 2005-May 2009 26
Table 7: Characteristics of different cardholder target segments 45
Table 8: Outstanding balances on the books of banks (A$bn), June 2004-June 2009 64
Table 9: Metrics for credit and charge card accounts, May 2004-May 2009 87
Table 10: Metrics for credit and charge card accounts, May 2004-May 2009 88
Table 11: Metrics for credit and charge card accounts, May 2004-May 2009 89
Table 12: Metrics for credit and charge card accounts, May 2004-May 2009 90
Table 13: Metrics for credit and charge card accounts, May 2004-May 2009 91
Table 14: Metrics for credit and charge card accounts, May 2004-May 2009 92
Table 15: Metrics for debit card accounts, May 2004-May 2009 93
Table 16: Metrics for debit card accounts, May 2004-May 2009 94
Table 17: Metrics for debit card accounts, March 2008-May 2009 95
Table 18: Metrics for debit card accounts, March 2008-May 2009 96
Table 19: Number of credit cards held, April 2009 96
Table 20: Number of credit cards held by household income, April 2009 97
Table 21: Market share of main cardholders by issuer, 2008-09 97
Table 22: Market share of main cardholders by brand, 2008-09 97
Table 23: Reasons for choosing main credit card provider, April 2009 98
Table 24: Reasons for choosing main credit card provider, April 2009 98
Table 25: Sources of information used when choosing main credit card provider, April 2009 99
Table 26: Common sources of information used when choosing provider of main credit card, April 2009 99
Table 27: Time held main credit card, 2008-09 100
Table 28: Time held main credit card, April 2009 100
Table 29: Monthly spending on main credit card, April 2009 101
Table 30: Monthly spending on main credit card, 2008-09 101
Table 31: Reasons for using non-main card, April 2009 101
Table 32: How much of the balance cardholders usually pay each month on their main credit card, 2008-09 102
Table 33: How much of the balance cardholders usually pay each month on their main credit card, April 2009 102
Table 34: How often cardholders pay interest on their main credit card, 2008-09 103
Table 35: Features of main credit card, April 2009 103
Table 36: Reasons for dissatisfaction with main credit card provider, April 2009 103
Table 37: Satisfaction with provider of main credit card, 2008-09 104
Table 38: Satisfaction with provider of main credit card, April 2009 104
Table 39: Methods of arranging main credit card, April 2009 105
Table 40: Methods of arranging main credit card, 2008-09 105
Table 41: Preferred payment method for different transactions, April 2009 105
Table 42: Ranking of importance of product features when choosing new credit card, April 2009 106
Table 43: Likelihood to switch credit card provider for better features, April 2009 106
Table 44: Attitude statements regarding credit cards, April 2009 107
Table 45: Reasons for switching main credit card, April 2009 107
Table 46: Credit limit of main credit card, 2008-09 108
Table 47: View of credit limit of main credit card, April 2009 108
Table 48: Reasons for not having credit card, April 2009 108
Table 49: Brand market share of value of credit and charge card transactions, May 2004-May 2009 109
Table 50: Merchant service fees, March 2003-March 2009 110
Table 51: Market share of banks' outstanding household credit card balances, June 2004-March 2007 111
Table 52: Market share of banks' outstanding household credit card balances, April 2007-June 2009 112
Table 53: Outstanding household credit card balances on bank books, June 2009 113
Table 54: Bank market shares of outstanding household credit card balances on bank books, June 2009 113
Table 55: Indexed growth of bank outstanding household credit card balances, June 2004-June 2009 114
Table 56: Average rates for standard cards, low rate cards and 90-day bank bills, July 2004-July 2009 115
Table 57: Average margins for standard and low rate cards over 90-day bank bills, July 2004-July 2009 116
Table 58: Bank fees accrued from households (A$bn), 1998-2008 117
List of Figures
Figure 1: The myriad cards available in the market fall into a band defined by interest rates and fees 6
Figure 2: The number of credit and charge card accounts has grown strongly, May 2004-May 2009 13
Figure 3: Average monthly transaction value on credit and charge cards has increased slightly, May 2004-May 2009 14
Figure 4: Monthly repayments on credit and charge cards have increased, May 2004-May 2009 16
Figure 5: Net repayments have recently increased, May 2004-May 2009 17
Figure 6: Outstanding balances on credit and charge card accounts have leveled off, May 2004-May 2009 18
Figure 7: The proportion of outstanding balances accruing interest has remained stable, May 2004-May 2009 19
Figure 8: Average credit limits have leveled off, May 2004-May 2009 20
Figure 9: Debit card transaction values have almost doubled in five years, May 2004-May 2009 21
Figure 10: Average monthly transaction value per debit card account has increased strongly, May 2004-May 2009 22
Figure 11: Scheme debit cards are relatively common in the market, March 2008-May 2009 24
Figure 12: Scheme debit cards have a higher average purchase value, March 2008-May 2009 25
Figure 13: Higher age groups hold more credit cards, April 2009 28
Figure 14: Higher income groups hold more credit cards, April 2009 29
Figure 15: Most credit cardholders have held their main card for over five years, 2008-09 30
Figure 16: NAB main cardholders have the longest tenure and Bankwest the shortest, April 2009 31
Figure 17: No perceived need is the most common reason for not having a credit card, April 2009 32
Figure 18: The reasons for not having a credit card are complex and overlapping, April 2009 33
Figure 19: Around half of credit cardholders name a Visa card as their main credit card, 2008-09 34
Figure 20: The major banks have captured a larger share of main credit cardholders, 2008-09 35
Figure 21: The median monthly spending on main credit cards is A$500-A$999, April 2009 36
Figure 22: The proportion spending A$2,000 or more has increased, 2008-09 37
Figure 23: Card-based payment methods are commonly used, April 2009 38
Figure 24: Secondary cards are commonly used to separate different kinds of expenses, April 2009 39
Figure 25: Credit limits on cardholders' main credit cards have increased slightly, 2008-09 40
Figure 26: Most cardholders are fine with their credit limit, April 2009 41
Figure 27: Most cardholders generally pay off the entire monthly balance on their main credit card, 2008-2009 42
Figure 28: American Express cardholders are more likely to be transactors, April 2009 43
Figure 29: A significant proportion of cardholders never pay interest on their main credit card, 2008-09 44
Figure 30: Banks can segment their product and customer targeting strategies into three groups 45
Figure 31: There are tradeoffs in targeting different customer groups 46
Figure 32: Credit cardholders are split in regard to rewards, April 2009 47
Figure 33: Most cardholders have arranged their main cards face-to-face, April 2009 48
Figure 34: Face-to-face is the most common method of arranging credit cards, 2008-09 49
Figure 35: Word-of-mouth is a powerful source of information when choosing card provider, April 2009 50
Figure 36: Bankwest cardholders are the most likely to have used the website for information, April 2009 51
Figure 37: Rewards schemes are a common feature of credit cards, April 2009 52
Figure 38: Banks have been very successful at cross-selling cards, April 2009 53
Figure 39: A large proportion of CBA cardholders were cross-sold their card, April 2009 54
Figure 40: Lower fees are the most appealing factor if choosing a new credit card, April 2009 55
Figure 41: Premium branding is the least appealing factor if choosing a new credit card, April 2009 56
Figure 42: Cardholders are most likely to switch card provider to avoid the card fee, April 2009 57
Figure 43: Switchers of main card provider commonly do so because of rates, April 2009 58
Figure 44: Cardholders have become less satisfied with their main credit card provider, 2008-09 59
Figure 45: Bankwest cardholders have the highest degree of satisfaction, April 2009 60
Figure 46: Uncompetitive interest rates are the most common reason for dissatisfaction, April 2009 61
Figure 47: CBA has the highest value of outstanding credit card balances from households, June 2009 62
Figure 48: Market share of banks' outstanding balances for household credit cards, June 2009 63
Figure 49: Smaller banks have grown their market share of bank outstanding balances, June 2004-June 2009 65
Figure 50: Large banks have not gained market share of bank outstanding balances, June 2004-June 2009 66
Figure 51: Citibank has grown its outstanding balances rapidly, June 2004-June 2009 67
Figure 52: MasterCard and Visa dominate charge and credit card transaction value, May 2004-May 2009 68
Figure 53: Merchant service fees have been falling since 2003, March 2003-March 2009 69
Figure 54: The cards available in the market fall into a narrow band defined by interest rates and fees 71
Figure 55: Reward generosity and card annual fee are correlated 72
Figure 56: There are a range of balance transfer options in the Australian credit card market 73
Figure 57: The major card providers differ in their market positioning 74
Figure 58: Most major card issuers have products with lower fees and rates 75
Figure 59: The mid-price segment has the highest number of offerings 76
Figure 60: Most card providers have at least one top end card offering 77
Figure 61: Average interest rates have dropped over the last year, July 2004-July 2009 78
Figure 62: Margins of credit card rates over 90-day bank bill rates has increased, July 2004-July 2009 79
Figure 63: Credit card fees have become an increasingly important component of bank fees, 1998-2008 80
Figure 64: Overall consumer leverage has recently decreased, March 2004-March 2009 81