Affinity and Partnership Marketing in UK Credit Cards and Personal Loans

Table of Contents

0.0 EXECUTIVE SUMMARY

• Research background and structure
• A wide range of partner organisations are involved in schemes for affinity or co-branded cards
• The majority of issuers active in this area are focusing on a small number of major partnerships
• … although MBNA' s approach is oriented towards managing a large number of small programs
• The comp. to promote personal loans through affinity and other partners is highly fragmented
• … with Lloyds TSB, mainly thanks to Black Horse Finance, identifiable as the leading partner
• Both Barclaycard and GE Money have adapted well to the changing market for co-branded cards
• The agg. and price comparison channel offers a major challenge to providers of affinity loans
• There is scope for banking institutions in the UK to draw inspiration from continental Europe

1.0 INTRODUCTION

• Finaccord
• UK affinity and partnership marketing publications
• Other UK consumer research publications
• PartnerBASE™
• Definitions
• Rationale
• The channels used to distribute financial products and services in the UK continue to proliferate
• … with on-line affinity and partnership marketing having growing rapidly in importance of late
• Methodology

2.0 MARKET OVERVIEW

• Affinities and partnerships in UK credit cards and personal loans
• Finaccord' s research identifies 400 current affinity schemes for promoting credit cards
• … with MBNA' s operating model oriented towards managing a large number of card programs
• … while other issuers are preferring to focus on a relatively small number of major partnerships
• Personal loans are marketed by at least a proportion of 24 affinity and partner sub-categories
• … with the competition for partnerships fragmenting among a variety of types of provider

3.0 NOT-FOR-PROFIT AFFINITY GROUPS

• 3.1 Charities
  • Introduction
  • Analysis of partnerships
  • The competitive structure of the UK charity card market has changed substantially
  • Few charities have organised formal affinity lending propositions for their supporters
  • intune' s main target market is the affluent over-50 age group served by Saga
  • … and the company is interested in working with suppliers that fulfil a variety of criteria
  • intune is employing a multi-channel distribution strategy including the charity' s high street outlets
  • … as it seeks to reach an operating profit of £15 million per annum by 2012
• 3.2 Educational institutions
  • Introduction
  • Analysis of partnerships
  • Affinity and partnership marketing through educational institutions focuses on three main areas
  • A significant number of educational institutions have discontinued affinity cards in recent times
• 3.3 Professional associations
  • Introduction
  • Over 50 professional associations possess in excess of 5,000 individual members
  • Analysis of partnerships
  • American Express has cherry-picked the affinity card offered by the British Medical Association
  • In many cases, brokers can unlock the door for lenders targeting professional associations
  • … with Parliament Hill having expanded its roster of member benefits clients to 11 associations
  • A further five entities each claim to more than one deal in the professional association segment
  • FIRSTPLUS Financial provides loans to the members of the Navy, Army and Air Force Institutes
• 3.4 Sports organisations
  • Introduction
  • Analysis of partnerships
  • MBNA accounts for the majority of affinity cards issued in partnership with sports organisations
• 3.5 Trade associations
  • Introduction
  • Analysis of partnerships
  • Trade associations play virtually no part in the distribution of personal loans and credit cards
• 3.6 Trade unions
  • Introduction
  • Analysis of partnerships
  • HBOS controls the majority of relationships primarily by virtue of its central deal with the TUC
  • … while LV= is the leading supplier of personal loans to the members of trade unions
• 3.7 Other not-for-profit affinity groups
  • Introduction
  • Lifestyle organisations
  • Four lifestyle organisations continue to promote an affinity card to members
  • Political parties
  • … with a similar number of political parties offering affinity cards or loans

4.0 FINANCIAL PARTNERS

• 4.1 Banks
  • Introduction
  • Analysis of partnerships
  • Abbey has reverted to managing its own credit card business having previously used MBNA
  • Customers who fail to qualify for a standard loan are often referred to credit broking partners
• 4.2 Building societies
  • Introduction
  • Analysis of partnerships
  • Four entities are active in the market for affinity credit cards issued through building societies
  • The Britannia promotes both its own loans and also car finance products sourced from Freeway
• 4.3 Credit unions
  • Introduction
  • At least two credit unions are distributing the pre-paid Argos Acard to their members
• 4.4 Friendly societies
  • Introduction
  • Analysis of partnerships
  • LV= has switched management of its credit card from its own banking division to Goldfish Bank
• 4.5 Insurance companies
  • Introduction
  • Analysis of partnerships
  • Among insurance companies, only NFU Mutual and Norwich Union offer white-labelled loans
• 4.6 On-line aggregators and brokers
  • Introduction
  • Analysis of partnerships
  • Moneysupermarket.com and The Motley Fool have each established significant partnerships
  • … for the provision of searching facilities for both credit cards and personal loans
• 4.7 Specialised lenders
  • Introduction

5.0 COMMERCIAL ENTITIES

• 5.1 Airlines
  • Introduction
  • Analysis of partnerships
  • Ryanair drops MBNA in favour of GE Capital Bank while flybe chooses LaSer UK
• 5.2 Automotive associations
  • Introduction
  • Analysis of partnerships
  • Morgan Stanley' s Goldfish issues affinity cards on behalf of both the Caravan Club and csma
• 5.3 Automotive dealers, repair shops and supermarkets
  • Introduction
  • Analysis of partnerships
  • Many automotive dealerships owe their survival to revenues derived from financial services
  • … and a majority of firms in this category have created group-wide finance and leasing deals
• 5.4 Automotive manufacturers
  • Introduction
  • Analysis of partnerships
  • The card developed by American Express and BMW is a significant new move in this sector
  • The new products are designed to re-enforce customer loyalty to the BMW brand
  • BMW' s affinity marketing partners were selected for three main reasons
  • All but a small number of niche or motor cycle brands have established official finance schemes
  • Fiat Auto Financial Services and GMAC are now classifiable as joint venture companies
• 5.5 Cricket and rugby clubs
  • Introduction
  • Analysis of partnerships
  • Only Bank of Ireland disturbs MBNA' s dominance in the cricket and rugby club affinity card sector
  • Through its Black and White Connections concept, Hull R.F.C. offers consumer finance options
• 5.6 Football clubs
  • Introduction
  • Analysis of partnerships
  • MBNA continues to be the dominant force in the market for football club affinity cards
  • … although Barclaycard plays a trump card by means of its successful Premiership Card
  • Few football clubs have elected to endorse a specific provider in the field of personal loans
  • … although Zebra Finance claims to be ‘recognised and endorsed’ by around 30 clubs in total
• 5.7 Internet, media and telecoms entities
  • Introduction
  • Analysis of partnerships
  • The market segments between traditional affinity cards and credit card searching facilities
  • Five providers have established more than one on-line credit card searching deal each
  • A number of factors motivated the launch of the SkyCard by Barclaycard and BSkyB
  • … and the program fits well with the issuer' s wider strategy of focusing on ‘blockbuster’ deals
  • The two partners are aiming for 20% penetration within the relevant customer base by 2010
  • Moneysupermarket.com and Moneyexpert.com account for a majority of media affinities
  • … although AWD Moneyextra is one of a number of players that is also exploring this arena
• 5.8 On-line price comparison providers
  • Introduction
  • Analysis of partnerships
  • A number of on-line price comparison providers offer own-brand credit card searching facilities
  • … with a similar number also having initiated activities in the field of personal loans
• 5.9 Retailers
  • Introduction
  • Analysis of partnerships
  • Over a third of major retailers in the UK have introduced their own co-branded or store cards
  • GE Capital Bank is the leading specialist issuer of retailer cards in the UK market
  • 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
  • Citibank entered the sector in 2007 by means of a co-branded card developed with Shell
  • GE Capital Bank has engineered an impressive re-positioning of the ASDA co-branded card
  • … with the result that the majority of the card' s key metrics have improved dramatically
  • 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 competition for retailer mandates is offered by a further six main finance providers
  • A single, exclusive retailer partnership can be attributed to each of four lending institutions
• 5.10 Travel companies
  • Introduction
  • Analysis of partnerships
  • Excluding airlines, very few travel companies have developed co-branded credit cards
  • … although the launch of the OnePulse Card in July 2007 adds up to an innovative development
• 5.11 Other commercial entities
  • Introduction
  • Branded conglomerates
  • Saga and Virgin leverage their brands across the full consumer financial services spectrum
  • … with Saga having switched its co-branded credit card to AIB towards the end of 2007
  • Loyalty schemes
  • The loyalty schemes category extends to a range of diverse travel and other reward programs
  • … with several offering members the chance to earn points through taking out personal loans
  • … and with six schemes having developed or re-launched fully-fledged co-branded credit cards
  • AIRMILES reconfigures its affinity strategy by forging a new link with Lloyds TSB
  • Delivering memorable experiences continues to be key to the AIRMILES proposition
  • Lloyds TSB hopes to leverage the relationship across a range of financial services
  • AIRMILES has bolstered its range of family-oriented redemption options
  • … and is also in the process of rolling out a policy asserting its ‘green’ credentials
  • The Post Office
  • The Post Office has extended its financial services joint venture with Bank of Ireland to 2020

6.0 EUROPEAN INNOVATIONS

• Introduction
• Events in affinity and partnership marketing in Europe, 2006 and 2007
• Winter 2006
• Citibank unveils new affinity marketing ventures in Belgium and the Czech Republic
• UBS launches Swiss charity card with Optimus Foundation
• Banque Accord' s Oney.fr links with on-line hi-tech retailing specialist in France
• Bank of Ireland ties with La Caixa for Irish consumers buying property in Spain
• BPU Banca launches InItaly immigrant financial services proposition
• CreditPlus Bank signs distribution deal with Bertelsmann book club in Germany
• Deutsche Postbank targets lawyers through legal publishing affinity card
• American Express unveils new bank partnerships in Romania and Russia
• Cetelem forms consumer finance joint venture with French building firm
• San Paolo IMI and Veneto Banca tie up commercial affinity group deals in Italy
• Spring 2006
• CC Bank and Lidl tie for credit card with petrol discount offer in Germany
• ABN AMRO creates partnership with Dorpspunt to grow rural penetration
• Fiditalia and leading technology distributor tie for consumer finance and card proposition
• Banque Accord and Norauto extend collaboration to private label card
• American Express enters Bosnia-Herzegovina through card issuing deal with CFU
• Grupo Santander initiates affinity banking link with parliamentary association
• Through AUTOSCOUT24, Volkswagen secures on-line partner for financial services
• Banca Intesa and eBay collaborate to target over 500,000 Italian SMEs
• LaSer introduces new affinity cards with automotive repair centre and football club
• Millennium BCP seals affinity link with economists' institute in Portugal
• CIC establishes tie with OSEO for start-up and small business loans in France
• Juventus and Banca Popolare Italiana launch pre-paid Kalibra card
• Summer 2006
• Citibank rolls out new airline co-branded credit cards in the Czech Republic and Hungary
• American Express expands network of banking partners to Serbia and Slovakia
• CGD creates affinity banking deal with Portuguese economists
• Finaref introduces private label card in association with Téléshopping
• Banca Intesa works with local authority for mortgage designed for temporary workers
• GE Money Bank ties for on-line finance deal with German arm of Fujitsu Siemens
• Crédit Agricole links for European automotive finance joint venture with Fiat
• Groupe Caisse d' Epargne and Carige forge Italian consumer credit joint venture
• Autumn 2006
• Citibank rolls out new co-branded cards in Greece and Sweden
• Commerzbank launches co-branded card with Steigenberger Hotel Group
• Through GCE Fidélisation, Caisses d' Epargne signs up to S' Miles loyalty scheme
• HSBC ties with Banco Sabadell unit to serve UK nationals residing in Spain
• Fortis and An Post finalise details of Irish financial services joint venture
• Rabobank and WNF unveil green affinity credit card in the Netherlands
• MLP forges affinity financial services link with association of dental students in Germany
• Winter 2007
• Citibank launches new co-branded credit cards in Greece and Hungary
• Landesbank Berlin links with Amazon for co-branded card in Germany
• BBVA' s Barceló Viajes Visa credit card amasses 60,000 clients since launch
• Santander rolls out affinity banking strategy for affluent foreign nationals
• Banco Sygma forges loan distribution link with Spanish insurer
• Spring 2007
• LaSer Group initiates a trio of new affinity ventures in France and the Netherlands
• GE Money Bank and Kia partner for automotive finance joint venture in Germany
• Citibank and Shell introduce co-branded card in Denmark
• Deutsche Bank ties with pharmacy chain for German consumer credit venture
• Landesbank Berlin introduces two new co-branded cards with media affinities
• UEFA EURO 2008 MasterCard launched by UBS in Switzerland
• Crédit Agricole and OSEO strengthen partnership to serve French SMEs
• Summer 2007
• CGD introduces co-branded card in association with MTV for Portuguese youth
• … inspired by Caja Madrid' s successful program with the same partner in Spain
• Caja Madrid launches Aquí-Allá debit card for immigrant market in Spain
• Finaref introduces Madelios private label card with single outlet retailer in France
• BNP Paribas ties with nine regional mutual insurers serving students
• Citibank launches Russian travel co-branded card through link with Kuda.ru travel agency
• … and ties with EKO Natural Gas for affinity loans in Greece
• Monte dei Paschi di Siena renews link with Enel to encourage solar power systems
• Agos and Piaggio form relationship for branded motor cycle finance in Italy
• Banesto concludes affinity financial services partnership with UNICEF in Spain
• CreditPlus Bank links with T-Online for Internet lending initiative in Germany
• Commerzbank creates on-line marketing tie with German arm of eBay
• Landesbank Berlin introduces new co-branding schemes with media affinities
• GE Money Bank launches new credit card with leading German technology retailer
• MLP and Interhyp establish mortgage joint venture in Germany
• Autumn 2007
• LaSer reinforces co-branding activity in France through launch of flagship card
• BNP Paribas and Orange combine for co-branded card in deregulated French market
• Go Sport France selects Finaref as partner for financial services development
• American Express secures Kazakh and Lithuanian bank partnerships
• Citibank introduces new co-branded card with prominent Belgian electricals retailer
• BNL and Intesa Sanpaolo enter into affinity lending deals for Italian pensioners
• Santander ties with Portuguese SME trade association for affinity banking package
• Nordea acquires Stockmann financial services business and targets international expansion
• Bankinter assumes control of Capital One joint venture with 290,000 customers
• Fiditalia and Zurich launch new revolving co-branded credit card in Italy
• Hypovereinsbank' s FC Bayern SparKarte exceeds 150,000 cards in circulation
• BAWAG PSK injects new momentum into post office bank through a raft of innovations

GRAPHICS / TABLES

• The affinity and partnership marketing universe
• Entities contacted for the research, segmented by broad category
• Affinity and partnership marketing schemes for accident insurance in the UK: penetration by type of partner
• Affinity and partnership marketing schemes for accident ins. in the UK: segmentation by op. model and comp
• Affinity and partnership marketing schemes for health insurance in the UK: penetration by type of partner
• Affinity and partnership marketing schemes for health ins. in the UK: segment. by op. model and competitor
• Charities offering credit cards: penetration, operating models and partner market shares
• Charities offering personal loans through partnerships
• Educational institutions offering credit cards: penetration, operating models and partner market shares
• Ranking of professional associations in the UK by actual or approximate number of members
• Ranking of professional associations in the UK by actual or approximate number of members (continued)
• Professional associations offering credit cards: penetration, operating models and partner market shares
• Sports organisations offering credit cards: penetration, operating models and partner market shares
• Sports organisations offering personal loans through partnerships
• Ranking of the top 50 trade associations in the UK by actual or approximate number of members
• Trade associations offering credit cards through partnerships
• Ranking of trade unions in the UK by actual or approximate number of members
• Trade unions offering credit cards: penetration, operating models and partner market shares
• Trade unions offering personal loans: penetration, operating models and partner market shares
• Lifestyle organisations offering credit cards and personal loans through partnerships
• Political parties offering credit cards and personal loans through partnerships
• Banks offering credit cards: penetration, operating models and partner market shares
• Banks offering personal loans through partnerships
• Building societies offering credit cards: penetration, operating models and partner market shares
• Friendly societies offering credit cards through partnerships
• Insurance companies offering personal loans through partnerships
• On-line aggregators and brokers offering credit cards: penetration, operating models and partner market shares
• On-line aggregators and brokers offering personal loans: penetration, op. models and partner market shares
• Specialised lenders offering personal loans through partnerships
• Airlines offering credit cards: penetration, operating models and partner market shares
• Automotive associations offering credit cards and personal loans through partnerships
• Auto. dealers, repair shops and supermarkets offering personal loans: pen., op. models and partner mkt. shares
• Automotive manufacturers offering credit cards: penetration, operating models and partner market shares
• Automotive manufacturers offering personal loans: penetration, operating models and partner market shares
• Cricket and rugby clubs offering credit cards: penetration, operating models and partner market shares
• Cricket and rugby clubs offering personal loans through partnerships
• Football clubs offering credit cards: penetration, operating models and partner market shares
• Football clubs offering personal loans: penetration, operating models and partner market shares
• Internet, media and telecoms entities offering credit cards: penetration, op. models and partner market shares
• Internet, media and telecoms ents. offering personal loans: penetration, op. models and partner market shares
• On-line price comparison providers offering credit cards: penetration, op. models and partner market shares
• On-line price comparison providers offering personal loans: penetration, op. models and partner market shares
• Retailers offering credit / store cards: penetration, operating models and partner market shares
• Retailers offering personal loans / consumer finance: penetration, operating models and partner market shares
• Travel companies offering credit cards through partnerships
• Branded conglomerates offering credit cards and personal loans through partnerships
• Loyalty schemes offering credit cards and personal loans through partnerships