Abstract
Why buy this report
Get insight into trends in market performance
- Pinpoint growth sectors and identify factors driving change
- Identify market and brand leaders and understand the competitive
environment
- Product coverage
- Consumer lending; Financial cards and payments
Executive summary
Retail spending buoyant despite higher interest rates
The outlook for the Norwegian economy remains strong, however the boom period
characterised by an extraordinarily high peak in 2007 is showing signs of
easing. Higher interest rates are impacting the "big ticket" items most
sensitive to such increases, for example cars, boats and houses, which are all
showing a month-on-month decline in terms of demand. At this stage and in
stark contrast, consumer retail spending data for June 2008 showed an
increase, most notably in foodstuffs, beverages and clothing. The robust
consumer retail spending behaviour comes on the back of several years of high
wage growth rates and disposable income levels and it remains to be seen if
this trend continues or if Norwegian purse strings will eventually tighten.
Despite uncertainty Norway is expected to perform better than most of its
Western European counterparts, as its mainstay oil exports continue to prop up
the economy.
New consumer finance regulations foster competition
In 2008, Norway' s regulators introduced new inter-bank rules which simplify
the process when customers change banks. From May 2008, the old bank will be
required to automatically transfer all details including loans, credits and
payments to the new bank following authorisation from the customer. The new
rules are in light of a growing trend for customers to shop around for the
best deal. Data reveals that over the past year 1-in-5 customers either
switched or began using a new bank. The two main tools used by banks to entice
customers are card loyalty programmes and cheaper fees, which are resulting in
expanded and more complex card product offers. To help dissect and highlight
the best offers available to bank customers the Norwegian government
established an on-line finance portal, finansportalen.no, to coincide with the
new inter-bank regulations.
Banks focus on price to stay competitive
The traditional Norwegian banking landscape changed dramatically in the 2000s,
amid increased foreign competition and the emergence of on-line banks offering
cheaper fees through a lower cost base. Since 2000, 14 new banks have entered
the Norwegian market. One on-line bank leading the way through cheaper fees is
SkandiaBanken A/S, which offers very competitive card products and is popular
with younger people. Indicative of a price competitive market, in April 2008
Norway' s largest bank DnB NOR AS recently cut all fees for the 700,000 members
of its customer loyalty programme, at an estimated revenue loss of NKr240
million per annum. This unexpected move was considered necessary in order to
retain and attract card loyalty customers, as the competition intensifies.
Credit cards gather momentum
In 2007 and 23008, credit cards registered higher growth rates in terms of new
cards issued, transaction volume and value than any other payment card
category. This created record transaction value sales and volumes, as many
Norwegians increased their frequency of use. As credit cards gather momentum,
the competition among card issuers is increasing with some offering free
credit card accounts. The Norwegian Financial Services Association reports
that the increased competition among card issuers is good news for the
customer, as prices are falling. Compared to 2003, Norwegian consumers spend
substantially more on their credit cards and international cards are by far
the most popular.
Higher card use boosts payment system efficiency
By transaction volume per inhabitant, Norway has the second highest card use
in the world behind Iceland, and it has one of the most advanced and efficient
payment systems in the world. The Central Bank, which oversees the payment
system, reports that Norwegian consumers are increasing their use of payment
cards and internet banking year-on-year, and this trend has helped to make the
overall payment system more efficient. Despite this, the Governor of Central
Bank, Svein Gjedrem, states that the recent trend of banks reducing or not
charging for card payment services in the face of increased competition is not
necessarily in the customer' s best interest. Gjedrem believes that the loss in
revenue poses a risk to the efficiency of the system, as banks are less likely
to reinvest in the system.
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