Report: Retailer Financial Services in Europe TOC

0.0 EXECUTIVE SUMMARY

The research is based on a survey of 1,895 major retail brands across 25 European countries
Department stores are the most likely to be operating their own co-branded or store card
Well over 50% of retailer cards in Europe are private label or are linked only to a local network
Issuers owned by or affiliated to BNP Paribas and GE Capital account for around 30% of progs
Almost 50% of the 140 French retailers surveyed have introduced their own loyalty card
Multi-partner loyalty schemes constitute an important aspect of the market in several territories
Retailers in central and eastern Europe are most likely to tie with several cons. finance providers
For the most recent full year, Tesco Personal Finance generated operating profits of £139 million
Insurance is most common among supermarkets, home shopping firms and department stores
Retailers can take advantage of strong underlying growth in many European credit card markets
Store cards can be internationalised and loyalty cards can be converted into payment cards
Cons. among conventional banks paves the way for more retailers to launch their own banks
Retailers in Europe can learn from the strong development of retailer insurance in the UK
General dynamics in the retailing market itself are aiding the development of retailer financial svs
Retailers partnerships represent an important strategic option for banking and insurance entities

1.0 INTRODUCTION

Finaccord
Rationale
Retailer financial services can be broken down between ' traditional' and ' non-traditional' services
Retailers can take advantage of rapid growth in consumer finance and credit card markets
Consolidation among conventional banks provides justification for the entry of retailer banks
The evolution of the retailing market itself is also favourable to the integration of financial services
Methodology
Finaccord' s research extends to 1,895 significant retail brands in 25 European countries...
... and also includes interviews with both major retailers and financial services providers

2.0 EUROPEAN OVERVIEW

Introduction
Retailer payment cards
Retailers in Spain, Finland, France and Greece are most likely to have introduced a card
A number of major retailers operate payment cards through joint venture or captive entities
Over 60% of department stores in Europe have launched their own co-branded or store card
Both MasterCard and Visa have made inroads into Europe' s retailer card market...
... although well over 50% of cards are classifiable as private label or belong to local networks
The strength of the main international card networks varies substantially by country
Issuers linked to BNP Paribas and GE Capital account for almost 30% of retailer card schemes...
... and a further six banking groups possess substantial cross-border operations in this market
Retailer loyalty cards
Well over a quarter of major retailers possess a loyalty card with no payment function
The high penetration in Finland is due to the Plussa, S-Kortti and Ykkösbonus loyalty schemes
Health and beauty rets. are particularly active in offering loyalty cards with no payment function
Almost two thirds of loyalty cards could theoretically be converted into fully-fledged pay. cards
Consumer finance / personal loans
France' s status as an innovative market for retailer finance is reflected in high penetration rates
Penetration rates for point-of-sale finance easily exceed 50% in two retailing categories
Use of multiple finance providers is most in evidence in territories in central and eastern Europe
Captives and joint ventures
Captive retailer finance arms can constitute attractive acquisition targets for mainstream lenders
65 of the 1,895 retailer brands surveyed source their cards or finance from a captive entity...
... and a variety of joint ventures are also in evidence, including a high number involving Cetelem
Insurance
Retailer distribution of mainstream ins. lines is now a reality in 12 of the markets surveyed...
... with activity being most advanced in the three largest markets - France, Germany and the UK
Schemes for motor insurance and household insurance account for over 40% of the total
Supermarkets and department stores benefit from high ' footfall' and burgeoning e-commerce
Retailers in the UK have shown that it is possible to have a serious impact in insurance
The share of supermarkets in sales of pet insurance is in excess of 25% of the market total

3.0 AUSTRIA

Introduction
Retailer payment cards
Few Austrian retailers have developed their own branded payment cards...
Retailer loyalty cards
... although almost one third have launched loyalty cards
Consumer finance / personal loans
Santander Consumer Bank is the foremost provider of consumer finance to major retail brands
Banking products
Retailers have yet to develop banking products as a part of their financial services activity
Insurance
A handful of retailers in Austria promote ski-ing or travel insurance products...
... all of which source their policies from a single, external provider

4.0 BELGIUM

Introduction
Retailer payment cards
Cetelem is the dominant partner for payment cards among Belgian retailers...
... and a number of organisations offer debit cards linked to the customers' bank accounts
Retailer loyalty cards
Over 40% of major retailers in Belgium have introduced loyalty cards
Consumer finance / personal loans
Cetelem also claims the majority of major, exclusive partnerships for point-of-sale finance
Banking products / insurance
Thus far, Belgian retailers have eschewed involvement in mainstream banking and insurance

5.0 BULGARIA

Introduction
Retailer payment cards
The first co-branded payment cards have begun to appear in the Bulgarian market...
Retailer loyalty cards
... albeit retailer loyalty cards with no payment function remain far more widespread
Consumer finance / personal loans
Provision of point-of-sale finance is concentrated mainly among computer and electrical retailers
Banking products / insurance
Retailer distribution of banking and insurance products has yet to occur in Bulgaria

6.0 CROATIA

Introduction
Retailer payment cards
American Express engineers a rare foray into the retailer card market by linking with Konzum
Retailer loyalty cards
Few retailers have established their own loyalty card programs...
... although many are linked to one or more of Croatia' s shop. centre or multi-retailer schemes
Consumer finance / personal loans / banking products / insurance
Other types of retailer financial service remain undeveloped in the Croatian market

7.0 CZECH REPUBLIC

Introduction
Retailer payment cards
Only a handful of major Czech retailers have yet launched a store or co-branded card
Retailer loyalty cards
12 of the 15 loyalty card programs identified are unaccompanied by fully-fledged payment cards
Consumer finance / personal loans
Ceská Sporitelna and Home Credit Finance provide some competition to the dominant trio
Banking products / insurance
Mainstream banking and insurance markets constitute uncharted territory for Czech retailers

8.0 DENMARK

Introduction
Retailer payment cards
The majority of retailer cards in Denmark do not carry an international payment logo
IKANO Finans lays claim to the greatest number of retailer partnerships for store cards
Retailer loyalty cards
The loyalty cards of several retailers have yet to be converted to fully-fledged payment cards
Consumer finance / personal loans
HandelsFinans is the dominant provider of point-of-sale finance to major Danish retailers
Banking products / insurance
Thus far, broader banking and insurance offerings have not been introduced by Danish retailers

9.0 FINLAND

Introduction
Retailer payment cards
In addition to the Plussa and Ykkösbonus schemes, a number of retailer cards are in evidence...
... with Handelsbanken, Ikano Rahoitus, OP Bank and Resurs Bank all present in this market
Retailer loyalty cards
Esprit, Lindex, MODA and Seppälä have all set up their own autonomous loyalty schemes
Consumer finance / personal loans
Nordea Rahoitus leads the market for retailer finance in Finland
Banking products
SOK' s launch of S-Bank in 2007 will be based in part around the retailer' s S-Kortti loyalty card
Insurance
Two major Finnish retailers have begun promoting travel insurance

10.0 FRANCE

Introduction
Retailer payment cards
Few retailer cards in France are linked to either the MasterCard or Visa networks
Joint venture issuers play a significant role in the French retailer card market
Banque Accord has developed a number of card partnerships outside of the Auchan Group
The Aurore card alone possesses around nine million customers in France
Retailer loyalty cards
Almost 50% of the major French retailers surveyed operate loyalty card programs
Groupe Laser, the immediate parent of Cofinoga, operates the S' Miles multi-partner scheme
Maximiles is France' s only web-based multi-retailer loyalty program...
... in an e-commerce market that is believed to be growing between 40% and 50% per annum
Consumer finance / personal loans
Franfinance lays claim to the highest number of exclusive relationships with major French rets
Banking products
Auchan, Carrefour, Casino and Géant all offer savings products to their customers
Banque Accord' s customer numbers worldwide increase by 12% to 4.3 million in 2005...
... aided by the joint ventures that the bank has set up in many international markets
Distribution and supplier partnerships are fundamental to Banque Accord' s growth aspirations
The launch of CardOps marks its entry into the payment and transaction processing arena
Insurance
An insurance proposition has been introduced by 12 major retailers in France
Carrefour has built up a portfolio of over 250,000 policyholders since launching ins. in 1992
Auchan sources its insurance portfolio from a panel of best-of-breed affinity partners

11.0 GERMANY

Introduction
Retailer payment cards
Less than 15% of large retailers in Germany have introduced their own payment card
Few German card issuers lay claim to more than one major partnership for retailer cards...
... as comparatively weak utilisation of credit cards necessitates a selective approach
Retailer loyalty cards
Over 40 retailers lacking a payment card do possess a loyalty card...
... albeit a number belong to either the HappyDigits or PAYBACK multi-partner schemes
The HappyDigits program has added several important partners since launch...
... and had accumulated 24 million cards by the middle of 2005
Most expenditure through the HappyDigits pay. card remains within the KarstadtQuelle Group
PAYBACK cardholders redeem around €6 million in bonus points each month
Consumer finance / personal loans
CC Bank and Citibank dominate relationships with rets. for point-of-sale finance in Germany...
... although a variety of other comps., some foreign-owned, are keen to expand in the sector
Creditplus Bank broke new ground in 2006 by linking with Bertelsmann' s media club
The deal with DER CLUB Bertelsmann constitutes a key aspect of the bank' s own strategy...
... and appears attractive on account of the demographics of the club' s members
An annual target has been set of above €10 million in gross advances from the relationship...
... although it is doubtful whether there are other media affinities worth developing
Banking products
KarstadtQuelle Bank' s customer deposits rise at an annual average in excess of 20%
Insurance
KarstadtQuelle Versicherung is the most long-standing retailer insurance initiative in Germany...
... although a number of new distribution alliances have been established in recent months
A number of insurance providers possess just one retailer insurance marketing deal each...
... while HDI' s membership of the PAYBACK scheme occasions a variety of opportunities
The deal with eBay complements existing links with Amazon and Tchibo
eBay' s base of registered users possesses favourable socio-demographic features
Most Internet-oriented marketing deals cannot be classified as genuine affinities
The Internet is coming of age as an insurance distribution channel in Germany...
... although web-based aggregation and broking has yet to develop fully

12.0 GREECE

Introduction
Retailer payment cards
Eurobank is currently a leader in the Greek store and co-branded retailer card market
Retailer loyalty cards
A number of major retailers in Greece operate pure loyalty card programs
Consumer finance / personal loans
Point-of-sale finance schemes are concentrated in the computer and electricals retailing sector
Banking products / insurance
Mainstream banking and insurance markets in Greece have yet to see the entry of retailers

13.0 HUNGARY

Introduction
Retailer payment cards
Three major retailers in Hungary have developed store cards in conj. with a pair of issuers
Only IKEA' s card, issued by Cetelem Bank, can be categorised as a private label program
Several card issuers are competing against Cetelem Bank for deals with Hungarian retailers
Retailer loyalty cards
A significant number of major retailers have introduced their own loyalty card programs...
... while others have elected to adhere to either the Multipont or Supershop schemes
Consumer finance / personal loans
Accord is the sole provider of point-of-sale finance to Décathlon in addition to Auchan
Banking products
Hungarian retailers have yet to branch out into the provision of mortgages or savings deposits
Insurance
Through its tie with Generali Providencia, Tesco has launched a motor insurance proposition

14.0 IRELAND

Introduction
Retailer payment cards
The development of store cards is limited to a minority of Ireland' s larger retailers
Retailer loyalty cards
The comparatively market size has dissuaded many retailers from launching loyalty cards
Consumer finance / personal loans
Few Irish retailers have concluded a formal arrangement for point-of-sale finance
Banking products
Lively competition among incumbent banks obviates any need for retailer-backed banks
Insurance
At present, Tesco remains the sole pioneer of retailer insurance in the Irish market

15.0 ITALY

Introduction
Retailer payment cards
A significant proportion of Italy' s larger retailers have introduced payment cards...
... although competition forces a number of issuers to focus on one major relationship each
Fiditalia has launched Italy' s first shopping centre card in alliance with I Granai...
... as part of an initiative that appears more practical than ind. point-of-sale finance facilities
The card paves the way for the development of retailer-specific loyalty programs...
... and is without precedent in the Italian market...
... albeit there are several challenges associated with the program' s development
Retailer loyalty cards
Many Italian retailers continue to offer a loyalty card unaccompanied by a payment card
Consumer finance / personal loans
Agos and Findomestic lay claim to a high proportion of deals for point-of-sale finance...
... although the fragmented nature of retailing in Italy creates opportunities for other providers
Banking products
Mainstream consumer banking products have not yet been introduced by retailers in Italy
... although eBay has forged a link with Banca Intesa in order to target SME customers...
... and to provide them with a new and secure sales channel
There is ample scope for the furher development of Banca Intesa' s partnership with eBay...
... which complements comparable relationships with DHL, Metro and Tiscali
Insurance
Even major retailers currently lack the scale to have a significant impact in the insurance sector

16.0 NETHERLANDS

Introduction
Retailer payment cards
Laser Nederland and Comfort Card exercise a virtual duopoly in the retailer pay. card market
Retailer loyalty cards
A majority of Dutch retailers offering loyalty cards have yet to launch their own payment card
Consumer finance / personal loans
Several retailers offer point-of-sale finance through joint venture or captive entities
Banking products
Only Bijenkorf has developed a mortgage proposition on behalf of its customers
Insurance
Dutch retailers have been encouraged by the propensity of cons. to use alternative channels
Proteq, an affinity marketing specialist, has set up schemes with both Kruidvat and V&D
Proteq and Kruidvat claim to possess compatible aspirations and philosophies...
... and the retailer' s network of 700 outlets offer an important route to market
Hema' s link with Aon Nederland generated 15,000 policy sales during its first year

17.0 NORWAY

Introduction
Retailer payment cards
The majority of retailer payment cards do not carry either the MasterCard or Visa brands...
... including all of those issued by GE Money Bank, the store card market leader in Norway
Retailer loyalty cards
Most Norwegian retailers that have developed a loyalty card do not offer a payment card
Consumer finance / personal loans
In Elkjøp and Jysk, Cresco claims two of the key relationships for point-of-sale fin. in Norway
Banking products / insurance
Thus far, Norwegian retailers have eschewed involvement in mainstream banking and ins

18.0 POLAND

Introduction
Retailer payment cards
A significant number of retailer cards in Poland are linked to international payment networks...
... with Cetelem having established the most exclusive partnerships with major retailers
Retailer loyalty cards
The majority of retailers with a loyalty card have yet to develop a payment card
Consumer finance / personal loans
GE Money Bank and Lukas Bank challenge Cetelem in the point-of-sale finance market
Banking products / insurance
Retailers in Poland have yet to diversify beyond payment cards and consumer finance

19.0 PORTUGAL

Introduction
Retailer payment cards
The payment cards offered by El Corte Inglés and Jumbo are both operated through captives...
... with as many as seven issuers competing for non-captive store card mandates
Retailer loyalty cards
Major retailers in Portugal are comparatively unenthusiastic when it comes to loyalty cards
Consumer finance / personal loans
Santander Consumer Finance is the main challenger to the two firms controlled by BNP Paribas
Banking products / insurance
Among major retailers in Portugal, only El Corte Inglés has developed an insurance proposition

20.0 ROMANIA

Introduction
Retailer payment cards
Société Générale' s BRD and Cetelem each lay claim to two exclusive retailer card relationships
Retailer loyalty cards
In addition to the 15 schemes identified, both Intersport and Mega Image plan to launch cards
Consumer finance / personal loans
Over ten lending institutions compete for relationships with retailers for point-of-sale finance
Banking products / insurance
Retailer distribution of banking and insurance products has yet to occur in Romania

21.0 SLOVAKIA

Introduction
Retailer payment cards
Most of the limited number of cards in Slovakia carry either the MasterCard or Maestro marques
Retailer loyalty cards
Fully-fledged payment cards have not yet been issued by any retailers offering loyalty cards
Consumer finance / personal loans
Most Slovakian retailers offering point-of-sale finance prefer to work with several providers
Banking products / insurance
Retailer distribution of banking and insurance products has yet to occur in Slovakia

22.0 SLOVENIA

Introduction
Retailer payment cards
Mercator' s Green and Gold PIKA cards constitute Slovenia' s major store card program
Retailer loyalty cards
dm-drogeriemarkt, Mercator, Merkur, Takko and TUš have all introduced their own loy. cards...
... while others are linked to one or more of Slovenia' s shop. centre or multi-retailer schemes
Mercator is seeking to have won a 40% of Slovenia' s groceries retailing market by 2010...
... and had issued almost 900,000 PIKA loyalty or payment cards by the end of 2006
The program will be extended to new sectors including banking, insurance, telecoms and travel
Consumer finance / personal loans / banking products / insurance
Other types of retailer financial service remain undeveloped in the Slovene market

23.0 SPAIN

Introduction
Retailer payment cards
Spanish retailers are among the most enthusiastic when it comes to payment cards...
... with a majority of programs still classifiable as private label initiatives
MBNA appears to have made little progress in the retailer card market since its entry in 2000
Retailer loyalty cards
Comparatively few large Spanish retailers have introduced stand-alone loyalty cards
Consumer finance / personal loans
A trio of finance providers dominate relationships for point-of-sale credit in Spain
Banking products
The provision of mortgages by Alcampo is an isolated example of retailer banking in Spain
Insurance
Involvement in insurance intermediation is restricted to five major retailing brands
The captive underwriter of El Corte Inglés has accumulated almost 1.13 million policyholders
Alcampo' s insurance proposition is available only to customers holding its payment card

24.0 SWEDEN

Introduction
Retailer payment cards
The payment cards of six retailers are issued and managed by captive entities
Sweden possesses a surprisingly high number of competitors jostling for retailer relationships
Having issued around 800,000 cards, Resurs Bank is a leader in the Swedish store card sector
Since the late 1980s, IKANO, a sister firm to IKEA, has expanded its ops. into new territories
Retailer loyalty cards
In excess of 25% of major Swedish retailers have introduced loyalty card programs
Consumer finance / personal loans
The partners of Handelsbanken Finans for point-of-sale finance include Dialect and El Giganten
Banking products
ICA Banken has accumulated 280,000 fully-fledged banking customers since launch in 2002
ICA Banken was launched in the wake of development of the original customer card
Progress was initially gradual as a result of slower-than-expected switching rates...
... although the bank' s many points of differentiation have since assisted its progress
65% of all banking product sales are realised via the Internet
ICA Banken is planning to launch new savings products during 2007
The development of IKANO Banken has also been characterised by strong growth
Insurance
The strength of Sweden' s leading insurance firms may be deterring retailer participation

25.0 SWITZERLAND

Introduction
Retailer payment cards
Cards issued by myOne Services are accepted at around 10,000 points of sale in Switzerland
Credit Suisse and OZ Bankers manage the majority of non-captive retailer payment cards
Retailer loyalty cards
Over 30% of major retailers in Switzerland have introduced loyalty cards
Consumer finance / personal loans
Three Swiss retailers organise point-of-sale loans through captive finance providers
Banking products
The customer loan portfolio of Migros Bank was worth CHF20.6 billion by the end of 2005
Insurance
myOne Service is collaborating with AIG Europe for accident and health insurance policies

26.0 TURKEY

Introduction
Retailer payment cards
Turkey' s near-ubiquitous multi-merchant loyalty card schemes impede individual ret. initiatives
Cards linked to multi-retailer progs. account for around 70% of all credit cards issued in Turkey
Retailer loyalty cards
Several major retailers in Turkey have introduced their own loyalty card programs...
Consumer finance / personal loans
... although the market for point-of-sale finance among retailers appears still to be limited
Banking products / insurance
The provision of banking or insurance products by Turkish retailers is currently non-existent

27.0 UNITED KINGDOM

Introduction
Retailer payment cards
Almost a third of major retailers in the UK have introduced their own payment cards...
... with MasterCard having substantially outpaced Visa in terms of private label conversions
Trad. store cards have come under pressure from other types of credit card in recent years
GE Capital Bank is the leading specialist issuer of retailer cards in the UK market...
... followed by Creation Financial Services and IKANO Financial Services
HSBC has significantly strengthened its competitive position in the retailer card market...
... and the card issuing divisions of several other banks also lay claim to notable relationships
Retailer loyalty cards
Loyalty card schemes introduced by individual retailers are comparatively few in number...
... although the Nectar program has grown rapidly since its launch in September 2002
ipoints has amassed over 60 partners and 15 reward categories since its launch in 2000...
... and lays claim to over one million members generating £1.5 million in revenues
Consumer finance / personal loans
The majority of retailers that offer point-of-sale finance work with a single, external partner
Lloyds TSB' s Black Horse Finance lays claim to the highest number of exclusive relationships...
... although other competitors in this field include Clydesdale Financial Services and HFC Bank
The Funding Corporation, an independent provider, currently holds the key ASDA mandate
Banking products
Retailer banking in the UK - in essence, the tale of two supermarkets
Problems with rising bad debt have tarnished the results of Sainsbury' s Bank in recent years
In spite of tougher conditions, Tesco Personal Finance continues to make impressive profits
A handful of other smaller initiatives for mortgage distribution are also in evidence
Insurance
Retailer distribution is now an important aspect of the wider phenomenon of ' brandassurance' ...
... with 20 major retail brands now active in distribution of mainstream insurance policies...
... including Argos, Bonmarché, Debenhams, eBay, Halford' s, Homebase and John Lewis
John Lewis launched Greenbee as a new direct services company in October 2006
Greenbee will allow the Partnership to expand its share of total client expenditure...
... leveraging a combined customer base across its main retail brands of 8 million...
... and its status as one of the most trusted retailers in the UK
Fit with the Partnership' s values has been key to selection of affinity partners...
... while the Greenbee name was chosen to emphasise the freshness of the offering

Retailer Financial Services in Europe

Table of Contents

0.0 EXECUTIVE SUMMARY

1.0 INTRODUCTION

2.0 EUROPEAN OVERVIEW

3.0 AUSTRIA

4.0 BELGIUM

5.0 BULGARIA

6.0 CROATIA

7.0 CZECH REPUBLIC

8.0 DENMARK

9.0 FINLAND

10.0 FRANCE

11.0 GERMANY

12.0 GREECE

13.0 HUNGARY

14.0 IRELAND

15.0 ITALY

16.0 NETHERLANDS

17.0 NORWAY

18.0 POLAND

19.0 PORTUGAL

20.0 ROMANIA

21.0 SLOVAKIA

22.0 SLOVENIA

23.0 SPAIN

24.0 SWEDEN

25.0 SWITZERLAND

26.0 TURKEY

27.0 UNITED KINGDOM