CM00139-002 Affluent Premium Cards

Premium Cards: Targeting Affluent Consumers CM00139-002/Published 12/2011

© Datamonitor. This report is a licensed product and is not to be photocopied Page 1

OVERVIEW

Catalyst

The affluent consumer segment has always been an attractive target market for the financial services industry. However,

there is only limited understanding as to what this segment could bring to the cards and payments industry. This report

looks at the current state of the premium card market, what affluent consumers expect from their payment cards, and the

opportunities that exist for card issuers to tap into in the years to come.

Summary

• Affluent credit card customers generate higher average revenues per customer than mass market

customers. From a revenue pool perspective, affluent customers generate 37% of total global credit card

issuer revenue, despite only accounting for 30% of the overall number of credit card customers.

• Affluent cardholders behave differently from the mass market in two key ways: affluent customers

consistently spend more on their credit cards than mass market customers, and they are also more open to

new payment innovations than the mass market.

• The demand for premium cards is expected to be strong in the next 12 months, as indicated by the top level

findings from Datamonitor's Premium Cards Opportunity Model. Overall, 11 million affluent customers are

expected to become premium card customers in the next 12 months, equivalent to an 8.5% increase from

the current level of penetration among affluent customers.

• The traditional definitions of premium cards, which includes gold and platinum cards, are slowly changing,

and there have been many developments to leverage the high demand for premium cards among mass

market customers. Some card issuers have moved to a new territory of premium cards, providing an extra

level of benefits and exclusivity to affluent customers.

Premium Cards

Targeting affluent consumers Reference Code: CM00139-002

Publication Date: December 2011

Executive Summary



EXECUTIVE SUMMARY

The findings in this report are based on a consumer survey conducted in June 2011 featuring over 29,000 consumers

across 20 countries, those being Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan,

Mexico, the Netherlands, Russia, South Africa, South Korea, Singapore, Spain, Sweden, the UK, and the US.

The survey is part of Datamonitor's Financial Services Consumer Insight (FSCI) initiative, the aim of which is to develop

industry understanding of consumer behavior towards financial services and to build a picture of how these behaviors

develop.

Assessing the attractiveness of the affluent customer segment

Defining different credit card customers and credit card products

In this report, Datamonitor looks at two areas with regards to credit cards for affluent consumers: the customer group, and

the products designed to serve the customer group. The definitions of each of these are shown in Figure 1.

Figure 1: Datamonitor's definition of premium products and affluent customers

High

net worth

USD1m+

Mass affluentUSD50k+

Mass Market

Ultra

premium

Platinum

Gold

Standard

Credit Card CustomersBy the size of their liquid assets

Credit Card ProductBy product level

AffluentCustomers

PremiumCredit Cards

Source: Datamonitor D A T A M O N I T O R

Affluent consumers are a sizable group, and are currently well-served by card issuers

The US represents the largest market of affluent customers

The US, Japan, and China are the top three markets in terms of the size of the affluent population. Across the 20 countries

included in this study, these three account for 67% of affluent customers.

Executive Summary



While the US holds the highest number of affluent customers, Japan boasts the largest proportion of affluent customers to

its overall population (35.8%). This is unsurprising when one considers the size of the Japanese economy and the wealth

accumulated by the nation's individuals over the last decade. Overall, the global average shows that 6.1% of the total

population are affluent.

The penetration of premium cards is low among affluent credit card customers in some countries

While credit card penetration among affluent customers is always higher than the mass market, not all of these consumers

have premium-branded cards. Globally, 89% of affluent customers hold one or more credit card, but interestingly, 40% of

those who do have credit cards do not have a premium credit card. It is interesting to note that Asian countries, with the

exception of Japan, generally have a relatively high penetration of premium cards among their affluent credit card

customers, while European countries generally fall in the bottom half of the list.

Datamonitor believes that inequality in the distribution of wealth in a country is one of the key drivers for premium cards. In

a country where there is a high degree of socioeconomic inequality, the situation drives extra demand for exclusivity that

products such as premium cards offer.

Affluent credit card customers are crucial to issuers

To estimate the size of revenue opportunities in this space, Datamonitor developed its Global Credit Card Revenue Model,

which utilizes multiple primary sources of information to provide estimates for the value of credit card issuer revenue for

each of the 20 countries, for both the mass market and affluent customer segments. The methodology of the model is

outlined in the Appendix of this report.

The average affluent credit card customer generates 35% more revenue than the average mass market

customer

Perhaps unsurprisingly, affluent credit card customers generate higher average revenue per customer than mass market

customers. From a revenue pool perspective, affluent customers generate 37% of total global credit card issuer revenue,

despite only accounting for 30% of credit card customers. The average affluent credit card customer generates total issuer

revenue of $204, 35% more than the similar figure for mass market customers.

Fee and transaction fee income dominate affluent credit card customer revenue

Overall, 82% of revenue generated by affluent credit card customers is from fee income and transaction fee income. This

differs from results for mass market customers, with only 53% of total income sourced from fee and transaction fee income.

Emerging countries represent the future high growth affluent markets

Regional analysis on the growth of the affluent customer group shows a clear trend, in that the emerging countries are

projected to grow far more quickly than more established markets. The number of affluent consumers in emerging countries

is expected to grow by 13% over 2009–14, whereas growth is projected at 5.7% for the developed countries.

Executive Summary



Profiling the affluent credit card customer

Affluent customers hold more credit cards per person than the average credit card customer

Affluent customers have access to a number of credit cards, at a slightly higher level than the average credit card

customer. Indeed, affluent customers hold 20% more credit cards than the overall market average. This outcome was

consistent across the 20 countries compared in Datamonitor's Financial Services Consumer Insight Survey 2011.

Overall, affluent customers in Asia Pacific hold more credit cards than customers in other countries, with the leading six

countries in terms of credit cards per affluent customer all from the Asia Pacific region. The difference in credit card holding

between affluent customers in Asia Pacific and other countries is primarily due to both strong consumer demand and the

different types of offers available from card issuers.

The minority of affluent customers makes up the majority of the revenue

One of the key findings from Datamonitor's Global Credit Card Revenue Model is the fact that 91% of transaction income

comes from the top 20% of customers. This highlights the value of affluent customers within the overall consumer base.

Interestingly, the findings do not necessarily exclusively correlate to customers' levels of wealth, but a high correlation is

also found in the level of a card's primacy. Primacy is important for card issuing business, with a majority of customers

having multiple cards that they use for various different purposes. This provides further evidence to suggest that issuers

should focus on the affluent customer segment.

Affluent customers are more likely to look for a new credit card than mass market consumers

The affluent segment is more likely to look for a new credit card than the mass market, with the UK the only country where

the overall average is higher than the figure for the affluent segment. At a global level, 26% of affluent credit card

customers are likely to look for a new credit card in the next six months. This is higher than the overall market, with an

average of 20% of consumers planning to look for a new card. The spread is also vastly different between countries.

Chinese affluent customers are the most likely to look for a new credit card (50%), while affluent customers in the

Netherlands are the least inclined to do the same (7%).

Affluent cardholders behave differently from the mass market in two key ways

Affluent customers spend 3.2 times more on their credit cards than mass market customers

Affluent customers consistently spend more on their credit card than mass market customers, with significant behavioral

differences noticeable in terms of both spending power and payment card preferences. On average, affluent credit card

customers spend 3.2 times more on their card than mass market customers, with the exception of Spain, where mass

market customers are slightly ahead of affluent customers in monthly spending.

Affluent customers are more open to new payment innovations than the mass market

Overall, 25% of affluent customers globally have used contactless payments in the last 12 months (from June 2011),

significantly higher than in the mass market, where only 16% of customers used the contactless method within the same

period.

Executive Summary



Affluent consumers are more receptive than mass market customers when it comes to new payment services on mobile

phones. For example, the use of mobiles as a tool to provide location-based offers has been discussed in different

countries, as well as its potential implementation in the credit card space. A total of 56.5% of affluent customers indicated

they would be interested in these services, while only 49% of mass market customers felt the same. The situation is no

different in terms of mobile payments, with 66% of affluent customers interested in being able to pay for instore items with

their phone.

Sizing global premium card opportunities

Datamonitor's Premium Cards Opportunity Model sizes the target market for premium cards

The output of Datamonitor's Premium Cards Opportunity Model is the number of potential new premium card customers per

100 customers in a specific country. This provides relative opportunity figures across the 20 countries assessed in this

report.

To measure future demand for premium cards among customers, Datamonitor developed a model based on its Financial

Services Consumer Insight Survey 2011. The purpose of this model is to provide a view on the relative demand of premium

cards, to help card issuers prioritize their growth strategies and target different consumer segments.

Overall, 11 million affluent customers are expected to become premium card customers in the next 12

months

The demand for premium cards is expected to be strong in the next 12 months, as indicated by the top level findings from

Datamonitor's Premium Cards Opportunity Model.

Overall, 11 million affluent customers are expected to become premium card customers in the next 12 months, equivalent

to an 8.5% increase from the current level of penetration among affluent customers. This means that 57.5% of affluent

customers are expected to have premium cards, an absolute increase of 4.5 per 100 customers.

Further analysis on different consumer groups shows that upgraders represent a bigger source of opportunity for new

affluent premium card customers than new entrants. Indeed, 6.9 million affluent customers are likely to upgrade their

standard card to a premium card in the next 12 months, while 4.1 million new entrants are expected over the same period.

However, upgraders represent both an opportunity and a threat to card issuers. After all, by their very nature their loyalty is

uncertain, as they have indicated that they are looking for a new card, one that is likely to be premium.

Emerging countries represent a high growth opportunity for premium cards

The opportunity for issuers and schemes to grow the affluent card market is significant, both in terms of converting affluent

consumers with standard cards to premium products and issuing cards to wealthy consumers who have no credit card at

present.

The three countries that offer the most attractive growth opportunity for premium cards as a proportion of the total of the

affluent population are Russia, Mexico, and Brazil. However, this is largely driven by the underlying growth forecasted for

the affluent population in these rapidly developing countries.

Executive Summary



Figure 2: Emerging countries represent high growth for the premium card market

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

RussiaMexico

BrazilSouth Africa

PolandItaly

IndiaSpain

SingaporeAustralia

ChinaSouth Korea

GermanyUK

CanadaNetherlands

JapanSweden

Hong KongUS

FranceGlobal average

Proportion of affluent customers

Upgraders New entrants Have a premium card

Do not want to upgrade Do not want a credit card

Source: Datamonitor's Premium Cards Opportunity Model D A T A M O N I T O R

While upgraders and new entrants represent opportunities for premium card issuers, there are two consumer groupings

highlighted in Figure 2 that represent a significant challenge.

• Do not want to upgrade – Affluent customers who have a credit card, but are not interested in a premium

card.

• Do not want a credit card – Affluent customers who are not interested in a credit card.

Globally, 33% of affluent customers do not want to upgrade to a premium card, while 9.3% do not want a credit card.

The US remains the largest addressable market for premium cards

While emerging countries represent a significant opportunity to convert affluent customers to premium cards, the absolute

size of the addressable market is relatively small in comparison to developed nations such as the US and Japan. While the

US and Japan already have high proportions of affluent customers using premium cards, the future addressable market is

still large.

Executive Summary



The future of premium credit cards

The high levels of credit card penetration have caused traditional premium brands to lose their exclusivity

The popularity of the credit card as a payment option among the mass consumer market has had an unfavorable

consequence for the premium card market. Exclusivity is one of the elements that card issuers use to differentiate their

offerings, and this comes under pressure when issuers reach out to the mass market.

Gold and platinum credit cards used to have restrictive requirements, such as high income requirements. Some still do, but

this is no longer the case for most products. Overall, 34.4% of mass market customers (who have total liquid assets of less

than $50,000) hold premium-branded credit cards (gold card and above). The popularity of premium cards among mass

market customers is even higher in Singapore, India, and Hong Kong, where more than half of customers in this segment

hold a premium-branded credit card.

Card issuers and schemes continue to target affluent consumers with post-platinum brands

While the brands have changed over time, the use of premium branding by issuers to segment their customer base has

continued. There have traditionally been several tiers of premium card above the platinum level, and these have yet to be

devalued in quite the same way.

Generally, there are two different levels of premium branding above platinum used to distinguish different customer levels

within the affluent segment. One is aimed at the mass affluent segment, while the other is ultra-exclusive products typically

offered by invitation only to a select group of high net worth customers.

While American Express has played a strong role in the ultra-premium cards space through its Centurion/Black brand,

there have been some developments from other card schemes in the last few years.

Visa, the largest scheme in the world by number of cards, has two levels above platinum, those being Signature and an

invitation only level in its Infinite card series. MasterCard also offers two different levels, World and World Elite, both of

which are positioned above its platinum card offering. The role of card schemes in providing these different levels is mainly

to offer premium service packages to issuers, such as concierge services and exclusive event access, which have a

different level of value at each stage.

American Express, which being a card scheme and a card issuer has a unique position in the market, offers the Centurion

card (also known as the Black card) as its leading offering by invitation only. In some countries such as Australia and

Singapore, it also has a level above platinum but below Centurion, which is its Platinum Reserve card series.

Invitation only cards provide additional exclusivity for high net worth customers

While restrictive requirements on some products work to provide the mass affluent segment with an extra degree of

exclusivity, invitation only cards not only provide exclusivity for high net worth customers, but also confer status that not

many people can achieve. This is the reason why there is still a market for invitation only cards.

The American Express Centurion card effectively created and popularized this market, and was followed by many others,

most of which are linked to the private banking arm of a financial institution. Interestingly, Datamonitor finds that many of

the recent developments pertaining to this type of card have occurred in Asia Pacific.

Executive Summary



In March 2011, DBS Singapore launched the DBS Insignia, a card dubbed as a million dollar card. It is an ultra-exclusive

credit card for high net worth customers in Singapore, and has a minimum credit limit of $785,000 (S$1m). The card, which

is available to select customers only, is a Visa Infinite offering, and is also Visa's leading offering for high net worth

customers.

HDFC Bank, the largest credit card issuer in India, launched the country's first ultra-premium credit card, Infinia, to target

high net worth customers. The card, which comes with no spending limit, was initially launched to a select 5,000

individuals.

Unique services will provide a point of differentiation for the affluent segment

While most premium cards have similar premium services offered through the card schemes, card issuers need to provide

a point of differentiation to add extra appeal to their target market within the affluent segment. Targeting niche affluent

segments with features and services tailored to their needs would position the product not just as a primary card, but also

help build loyalty and potentially create cross-selling opportunities for other financial products.

The OCBC Elite World Card, which was launched in Singapore on September 2010, provides a one-off 50% rebate of up to

S$3,000 ($2,313) towards the cost of a business class ticket on any airline. There are certain conditions that must be met,

one of which requires the cardholder to charge a minimum of S$75,000 ($57,800) during the qualifying period to their

OCBC Elite World card. The qualifying period lasts for 12 months.

While product features and additional services add real benefits and functionalities for cardholders, appearance can also be

an invaluable differential, especially for cardholders who appreciate the privilege of having a premium card.

A metal card (as opposed to one made of plastic) is one of the most recognizable premium features, and is offered for a

handful of invitation only cards, such as the American Express Centurion card, the J.P. Morgan Palladium card, and the

DBS Insignia card. The American Express Centurion card is made from titanium, while J.P Morgan named its card after the

palladium metal used for the product.

Table of Contents



TABLE OF CONTENTS

Overview 1

Catalyst 1

Summary 1

Executive Summary 2

Assessing the attractiveness of the affluent customer segment 2

Defining different credit card customers and credit card products 2

Affluent consumers are a sizable group, and are currently well-served by card issuers 2

Affluent credit card customers are crucial to issuers 3

Fee and transaction fee income dominate affluent credit card customer revenue 3

Emerging countries represent the future high growth affluent markets 3

Profiling the affluent credit card customer 4

Affluent customers hold more credit cards per person than the average credit card customer 4

The minority of affluent customers makes up the majority of the revenue 4

Affluent customers are more likely to look for a new credit card than mass market consumers 4

Affluent cardholders behave differently from the mass market in two key ways 4

Sizing global premium card opportunities 5

Datamonitor's Premium Cards Opportunity Model sizes the target market for premium cards 5


months 5

Emerging countries represent a high growth opportunity for premium cards 5

The US remains the largest addressable market for premium cards 6

The future of premium credit cards 7

The high levels of credit card penetration have caused traditional premium brands to lose their exclusivity 7

Card issuers and schemes continue to target affluent consumers with post-platinum brands 7

Unique services will provide a point of differentiation for the affluent segment 8

Assessing the Attractiveness of the Affluent Customer Segment 15

Table of Contents



Defining different credit card customers and credit card products 15

This report examines both the affluent customer group and the products designed to serve it 15

Affluent consumers are a sizable group, and are currently well-served by card issuers 16

The US represents the largest market of affluent customers 16

Demand for credit cards is high among affluent customers 18

However, premium card penetration is low among affluent credit card customers in some countries 19

Affluent credit card customers are crucial to issuers 21


customer 21

Fee and transaction fee income dominate affluent credit card customer revenue 23

Affluent customers will drive the future growth of credit cards 26

Profiling the Affluent Credit Card Customer 28

Affluent customers have access to a wide range of card products 28

Affluent customers hold more credit cards per person than the average credit card customer 28

The majority of affluent customers are active credit card users, but attachment levels vary globally 29

Affluent customers show strong demand for credit cards 32

Affluent customers are more likely to look for a new credit card than mass market consumers 32

Affluent customers are better informed about credit card products than the mass market 33

Affluent cardholders behave differently from the mass market in two key ways 34

Affluent customers spend 3.2 times more on their credit cards than mass market customers 34

Affluent customers are more open to new payment innovations than the mass market 36

Sizing Global Premium Card Opportunities 40

Datamonitor's Premium Cards Opportunity Model sizes the target market for premium cards 40

The Premium Cards Opportunity Model identifies two key consumer groupings for premium cards 40

Emerging countries will become high growth markets for premium card issuers 42


months 42

Emerging countries represent a high growth opportunity for premium cards 43

Table of Contents



Not all card issuers benefit from upgraders 45

The US remains the largest addressable market for premium cards 46

High growth in the number of affluent customers in emerging countries will provide strong future growth 47

The Future of Premium Credit Cards 48

The erosion of premium branding has not affected the targeting of affluent consumers 48

The high levels of credit card penetration have caused traditional premium brands to lose their exclusivity 48

Card issuers and schemes continue to target affluent consumers with post-platinum brands 50

Cards branded above platinum offer differentiation, but some are at risk of losing their exclusive status 51

Visa Signature and MasterCard World are aimed at offering extra services 51

However, the pressure to use this branding to attract customers is devaluing such offerings 53

Individuality is the key to targeting niche affluent segments 54

Card issuers with leadership in a particular area are valued highly by affluent customers 54

Invitation only cards provide additional exclusivity for high net worth customers 55

Unique services will provide a point of differentiation for the affluent segment 55

Appendix 57

Supplementary data 57

Methodology 66

Datamonitor's Global Credit Card Revenue Model analyzes card issuer revenue from three different sources66

Primary and secondary research 67

Further reading 67

Ask the analyst 68

Disclaimer 68

Table of Contents



TABLE OF FIGURES

Figure 1: Datamonitor's definition of premium products and affluent customers 2

Figure 2: Emerging countries represent high growth for the premium card market 6

Figure 3: Datamonitor's definition of premium products and affluent customers 15

Figure 4: The US is the largest market for affluent customers 17

Figure 5: Credit card penetration is higher among affluent customers than mass market

customers 18

Figure 6: 60% of global affluent credit card customers have a premium credit card 19

Figure 7: High inequality of wealth distribution creates demand for exclusivity 20

Figure 8: Affluent credit card customers generate more revenue per head than the mass market 22

Figure 9: Fee-derived income accounts for the majority of revenue from affluent credit card

customers 23

Figure 10: Source of income differs substantially between countries 25

Figure 11: Emerging countries are the future high growth affluent markets 27

Figure 12: Affluent customers hold more credit cards than the average customer 28

Figure 13: Affluent customers in France have the greatest attachment to a single credit card, while

those in Singapore are most likely to use multiple cards 30

Figure 14: The high proportion of customers who look for new credit cards represents both an

opportunity and a threat 32

Figure 15: Affluent customers are better informed about credit card products than mass market

customers 33

Figure 16: Affluent customers spend 3.2 times more on their credit cards than mass market

customers 34

Figure 17: Travel, food and drink, and fuel expenses are the three leading categories of credit card

usage among affluent customers 35

Figure 18: One in four affluent customers have used contactless payments 37

Figure 19: Affluent customers are more open to using mobile phones for banking-related services 38

Table of Contents



Figure 20: Affluent customers have higher levels of trust in their card issuers than the average

consumer 39

Figure 21: There are two target growth areas for premium cards: affluent consumers without a

premium card and those with no credit card at all 41

Figure 22: Upgraders represent the main source of growth for premium cards 43

Figure 23: Emerging countries represent high growth for the premium card market 44

Figure 24: The US has the largest addressable market for premium cards 46

Figure 25: There is a high penetration of premium-branded cards among mass market customers in

many countries 49

Figure 26: Lloyd TSB and Standard Chartered in Singapore are two issuers that no longer offer

gold credit cards 50

Figure 27: Examples of the extra levels of services offered to attract mass affluent customers 52

Figure 28: Metal cards help convey a special status 56

Figure 29: Datamonitor's Global Credit Card Revenue Model 66

Table of Contents



TABLE OF TABLES

Table 1: Premium brands used by the main international card schemes 51

Table 2: A comparison of the minimum requirement guideline for Visa Signature in different

countries 53

Table 3: Affluent customers across different countries, 2011 57

Table 4: Credit card penetration across different countries, by segment, 2011 58

Table 5: Penetration of premium cards among affluent credit card customers, 2011 59

Table 6: Annual revenue per credit card customers across different countries ($), 2011 60

Table 7: Annual revenue per affluent credit card customers, by source of income ($), 2011 61

Table 8: Affluent credit card customers and their primacy, 2011 62

Table 9: Monthly credit card spend, by segment ($), 2011 63

Table 10: Potential upgraders and new entrants to the premium card market, by country

(percentage of consumers), 2011 64

Table 11: Level of opportunity and addressable market size for new premium card customers, by

country, 2011 65

Assessing the Attractiveness of the Affluent Customer Segment



ASSESSING THE ATTRACTIVENESS OF THE AFFLUENT CUSTOMER SEGMENT

While there are many research studies that look at different consumer demographics and their credit cards, there is little

understanding of how affluent consumers feel about their credit cards.

The findings in this report are based on a consumer survey conducted in June 2011 featuring over 29,000 consumers

across 20 countries, those being Australia, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan,

Mexico, the Netherlands, Russia, South Africa, South Korea, Singapore, Spain, Sweden, the UK, and the US.

The survey is part of Datamonitor's Financial Services Consumer Insight (FSCI) initiative, the aim of which is to develop

industry understanding of consumer behavior towards financial services and to build a picture of how these behaviors

develop.

Defining different credit card customers and credit card products

This report examines both the affluent customer group and the products designed to serve it

In this report, Datamonitor looks at two areas with regards to credit cards for affluent consumers: the customer group, and

the products designed to serve the customer group. The definitions of each of these are below, and in Figure 3.

Figure 3: Datamonitor's definition of premium products and affluent customers

High

net worth

USD1m+

Mass affluentUSD50k+

Mass Market

Ultra

premium

Platinum

Gold

Standard

Credit Card CustomersBy the size of their liquid assets

Credit Card ProductBy product level

AffluentCustomers

PremiumCredit Cards





Affluent and mass market customers are defined by the size of their liquid assets

Affluent customers are generally defined by their income or their liquid assets; however, there is not a fixed threshold upon

which all banks agree that a client is affluent. Thresholds differ both between banks and between geographies. For the

purposes of this report, Datamonitor uses a liquid asset minimum threshold of $50,000 (or its equivalent in other

currencies) in onshore liquid assets as a starting point for affluent customers. This leaves mass market customers as those

who hold less than $50,000 in liquid assets.

Within the affluent consumer group, there are two sub-segments.

• Mass affluent customers – Those who hold from $50,000 up to $1m in liquid assets.

• High net worth customers – Those who hold more than $1m in liquid assets.

Liquid assets include cash and deposits, mutual funds/collective investments, direct equity investment, and direct bond

investments. The information behind this segmentation comes from Datamonitor's wealth and investments team.

Standard and premium credit cards are designed to target different consumer needs

Different types of credit cards are assessed in this study based on the credit card level or premium branding stated by card

issuers. These are segmented into two groups.

• Standard credit cards, which are also known in different countries as classic or standard cards, or have no

explicit branding.

• Premium credit cards, which are gold cards and above. This includes Platinum, and also 'post' platinum

cards (those which are positioned above this level, such as Visa Signature/Infinite, American Express

Centurion card and also MasterCard World.

Affluent consumers are a sizable group, and are currently well-served by card issuers

The US represents the largest market of affluent customers

The US, Japan, and China are the top three markets in terms of the size of the affluent population. Across the 20 countries

included in this study, these three account for 67% of affluent customers.

While the US holds the highest number of affluent customers, Japan boasts the largest proportion of affluent customers to

its overall population (35.8%). This is unsurprising when one considers the size of the Japanese economy and the wealth

accumulated by the nation's individuals over the last decade. Overall, the global average shows that 6.1% of the total

population are affluent.




Figure 4: The US is the largest market for affluent customers

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

10

20

30

40

50

60

70

80

90

100

Pro

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n o

f a

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en

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us

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ers

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mb

er

of

aff

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nt

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me

rs (m

illio

ns

)

Affluent customers across different countries, 2011

Number of affluent customers


Source: Datamonitor's Global Wealth Markets Database D A T A M O N I T O R




Demand for credit cards is high among affluent customers

The penetration of financial products among the affluent customer segment is high, consistently higher than among mass

market customers in the 20 countries studied in this report. Overall, 89% of global affluent customers have a credit or

charge card, compared to 70% of mass market customers.

In general, the penetration of credit cards in developed countries is higher than those in emerging countries. Canada, Hong

Kong, and Japan have the highest levels of credit card penetration among affluent customers. However, there are some

countries in which the credit card industry has strong competition from other payment cards; for example, debit and

deferred debit cards are very popular in certain European nations.

Figure 5: Credit card penetration is higher among affluent customers than mass market customers

97%

96%

95%

95%

94%

94%

94%

92%

91%

91%

89%

89%

87%

85%

84%

84%

81%

76%

75%

74%

64%

0% 20% 40% 60% 80% 100%

CanadaHong Kong

JapanSouth Korea

SingaporeUS

ChinaBrazil

MexicoUK

Global averageSpain

FranceAustralia

ItalyIndia

GermanySweden

South AfricaRussia

Netherlands

Proportion of consumers

Credit card penetration amongaffluent customers

Affluent customers Mass market customers

Note: figures in France and Germany also includes charge cards

Source: Datamonitor's FSCI Survey 2011 D A T A M O N I T O R




However, premium card penetration is low among affluent credit card customers in some countries

While credit card penetration among affluent customers is always higher than the mass market, not all of these consumers

have premium-branded cards. Globally, 89% of affluent customers hold one or more credit card, but interestingly, 40% of

those who do have credit cards do not have a premium credit card. Figure 6 highlights a significant difference in the

penetration of premium cards among affluent credit card customers. It is interesting to note that Asian countries, with the

exception of Japan, generally have a relatively high penetration of premium cards among their affluent credit card

customers, while European countries generally fall in the bottom half of the list.

The high penetration of premium cards in most Asian countries is mainly due to strong demand for premium branding

among affluent customers, a desire that is matched by the range of premium cards available from issuers within the region.

For example, Visa Infinite, an invitation only card, is available through five card issuers across four countries in Europe,

while Visa Infinite is available from card issuers across 13 countries in Asia (source: Visa Infinite website).

Figure 6: 60% of global affluent credit card customers have a premium credit card

59.5%

0% 20% 40% 60% 80% 100%

Singapore

IndiaHong Kong

China

South AfricaUS

South KoreaBrazil

Global average

MexicoUK

Canada

AustraliaSpain

GermanyFrance

Netherlands

JapanItaly

SwedenRussia

Proportion of affluent credit card customers

Penetration of premium cards among affluent credit card customers





High inequality of wealth distribution indirectly creates demand for premium cards

Datamonitor believes that inequality in the distribution of wealth in a country is one of the key drivers for premium cards. In

a country where there is a high degree of socioeconomic inequality, the situation drives extra demand for exclusivity that

products such as premium cards offer.

The Gini coefficient, an index that measures the degree of inequality in the distribution of family income in a country, is a

good way to explore this issue.

Figure 7 highlights a correlation between wealth distribution in a country (as reflected by the Gini coefficient) and the

current penetration of premium cards. If income is distributed with perfect equality, the index score is zero; if income is

distributed with perfect inequality, the index score is one. Figure 7 shows that inequality of wealth distribution in a country

plays into demand for premium cards. For example, the 10 countries with the highest premium card penetration have an

average Gini coefficient of 0.46, while the next 10 have an average of 0.32.

Figure 7: High inequality of wealth distribution creates demand for exclusivity

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Affluent credit card customers are crucial to issuers

To estimate the size of revenue opportunities in this space, Datamonitor developed its Global Credit Card Revenue Model,

which utilizes multiple primary sources of information to provide estimates for the value of credit card issuer revenue for

each of the 20 countries, for both the mass market and affluent customer segments. The methodology of the model is

outlined in the Appendix of this report.


customer

Perhaps unsurprisingly, affluent credit card customers generate higher average revenue per customer than mass market

customers. From a revenue pool perspective, affluent customers generate 37% of total global credit card issuer revenue,

despite only accounting for 30% of credit card customers. The average affluent credit card customer generates total issuer

revenue of $204, 35% more than the similar figure for mass market customers.

The term revenue in this context refers to the total gross income generated by providing credit card products to consumers.

This does not take into account the cost of running the product. For this reason, it is important to note that high revenue

figures do not necessarily translate into high profitability.

Analysis of these data at a country level show a large variance in the level of revenue each affluent customer generates

across the various markets, as seen in Figure 8. While there is a substantial difference across the 20 countries, affluent

customers consistently outperform the mass market in terms of total revenue per customer.




Figure 8: Affluent credit card customers generate more revenue per head than the mass market

$0 $100 $200 $300 $400 $500 $600

Sweden

Germany

Spain

Japan

Italy

Russia

Netherlands

South Africa

India

France

Hong Kong

UK

Singapore

US

South Korea

China

Brazil

Mexico

Canada

Australia

Annual revenue per affluent credit card customer (USD)

Affluent

Mass Market

Source: Datamonitor's Global Credit Card Revenue Model D A T A M O N I T O R

Australia has the highest revenue per affluent credit card customer

Australia leads the global rankings in terms of revenue per affluent credit card customer, with each affluent customer

generating an annual average of $499. In contrast, affluent credit card customers in Sweden generate an average of just

$84 in annual revenue. It is also interesting that there is a significant gap between Australia and Canada, which is second

highest at $282 per affluent customer. This suggests that Australia is a very attractive market for affluent credit card

customers, if revenue is used as the primary indicator.

Australia's high transaction volume on credit cards is one of a number of factors that have helped position the market at the

top of this list.

From a credit card annual turnover perspective, Australia is currently the most attractive proposition. On average,

Australian affluent customers spend nearly $25,000 annually per card, while the national average for 2011 is just under

$11,000. As it stands, this indicates that Australian credit card issuers are benefiting from both high turnover per customer

and a low number of credit cards among affluent customers, which drives up average activity per card.




The popularity of other cards limits credit card transaction volume in many countries

Analysis of the three countries with the least revenue per affluent customer shows that competition from other cards is

taking away transaction volume from credit cards, a consistent finding among both affluent and mass market customers.

Indeed, a large proportion of affluent customers in Sweden, Germany, and Spain consider pay now cards as their main

payment option.

Indian affluent customers differ the most from mass market customers

Undoubtedly, there is a clear separation in revenue generated from affluent and mass market credit card customers across

the 20 countries. However, affluent customers in India show the most striking differentiation from a revenue perspective,

generating 86.5% more revenue than mass market customers.

While the average revenue per affluent customer in India ($164) is relatively low compared to other countries, it still

represents an attractive proposition considering that the average mass market customer only generates annual revenue of

$88.

Fee and transaction fee income dominate affluent credit card customer revenue

Overall, 82% of revenue generated by affluent credit card customers is from fee income and transaction fee income. This

differs from results for mass market customers, with only 53% of total income sourced from fee and transaction fee income.

To recap, fee income refers to that which is collected predominantly from annual fees, but also includes fixed charges for

ATM use abroad as well as late payment and other administrative charges. Revenue from interchange collected by the

card issuer makes up the transaction fee category.

Figure 9: Fee-derived income accounts for the majority of revenue from affluent credit card customers

37% 32%

45%

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Affluent Mass market

Inc

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Consumer segments

Distribution of income by consumer segments, global average

Interest income

Transaction fee income

Fee income





The difference between the affluent and mass market revenue breakdowns reflects the way that affluent customers

generally use credit cards. Within the segment there are several different customer types.

• Customers who pay off their credit balance in full, generating less interest income than mass market

customers as a result.

• Customers who have a higher annual card turnover, thus generating more transaction fee income than

mass market customers.

• Customers who are happy to pay an extra annual fee, in return for the premium features or services on their

credit card.

This reflects the main challenge for card issuers who target affluent customers, which is to cover the cost of funding given

the lower revolve rate compared to the mass market.

However, the revenue mix differs substantially between countries

While in general fee derived income accounts for the majority of revenue from affluent credit card customers, this is not

necessarily accurate for all of the 20 countries included in this report. These differences are predominantly due to various

underlying factors that drive each of the three income sectors. Differences in terms of both customer behavior and market

structure have a significant influence on overall outcomes.




Figure 10: Source of income differs substantially between countries

0 100 200 300 400 500 600

Sweden

GermanySpainJapan

Italy

RussiaNetherlandsSouth Africa

India

FranceHong Kong

UKGlobal

SingaporeUS

South KoreaChina

BrazilMexico

CanadaAustralia

Revenue per affluent customers

Fee income Transaction fee income Interest income


Overall, Australian affluent credit card customers provide even revenue distribution from the three income sources. There

are three key drivers that explain why Australia leads the way in terms of credit card revenue from affluent credit card

customers.

• A high annual transaction volume means high interchange fee income – Annual transaction value

turnover of $24,800 positioned Australia at the top of the list in terms of annual turnover per credit card

among affluent customers. This result was mainly supported by good credit card penetration and a low

number of cards per affluent credit card customer (1.9), which shows that typical Australian customers

conduct their transactions using only one or two credit cards.

• A high revolve rate means high interest income for Australian card issuers – While Australian affluent

customers tend to have a lower revolve rate than mass market customers, it is still relatively high compared

to the rate for affluent customers in some other countries. Overall, 36.3% of affluent customers in Australia

revolved their credit card balance in 2011.

• Rewards add an extra reason for customers to pay an annual fee – While there are free options

available, such as using a debit card, affluent credit card customers may find that there is a strong enough




justification to pay an annual fee in return for extra features on their credit cards. Similarly to other

customers in developed countries, the exclusivity of premium products is not so much of an attraction point

for Australian affluent customers, but the attractiveness of points-based rewards offer represents the value

this segment considers essential.

Interestingly, Australia has a relatively low interchange fee for credit cards in comparison to many countries, yet card

issuers still manage to achieve strong streams of revenue on their portfolios. One explanation for this is that the low

interchange rate has led to high turnover per card, because card issuers feel compelled to charge a high annual card fee,

thus reducing the number of cards held per person.

Interest rate variance is one of the key drivers affecting the income distribution of a card issuing business. For example,

40.6% of revenue in Brazil is sourced from interest income, in comparison to 1.1% in Japan. The high interest income in

Brazil is largely due to the country's high interest rate environment, where a typical card may charge 14.99% per month on

the accruing balance, while in Japan a low interest rate environment limits the income sourced from this area.

A high interchange fee and substantial transaction value per card help drive income from affluent credit card customers in

South Korea. Indeed, the nation has one of the highest average interchange rates for a standard credit card at 2.9%, which

is substantially higher than many other countries.

The majority of credit cards in the UK and US do not have an annual fee on standard cards; such charges typically only

appear on cards above the platinum level. This leads to similar revenue distribution between the two countries, with the

majority of revenue in both cases sourced from transaction fee (interchange) income (51% for the UK and 58% for US).

One of the consequences for countries with no annual fee model is that customer spending is typically spread across

multiple cards. On average affluent customers in the UK and US hold 2.1 and 2.4 cards, marginally higher than Australia at

1.9 and France at 1.5.

Affluent customers will drive the future growth of credit cards

The growth of the affluent segment will be substantial over the next few years, according to Datamonitor's Global Wealth

Markets model. For the 20 countries included in this study, a compound annual growth rate (CAGR) of 6.9% is expected in

the number of affluent customers between 2010 and 2014, while overall population growth is expected to be only 0.6%.

This projected growth in the underlying customer demographic will create strong demand for mid and top level products,

which card issuers must anticipate.

Emerging countries represent the future high growth affluent markets

Regional analysis on the growth of the affluent customer group shows a clear trend, in that the emerging countries are

projected to grow far more quickly than more established markets. The number of affluent consumers in emerging countries

is expected to grow by 13% over 2009–14, whereas growth is projected at 5.7% for the developed countries.




Figure 11: Emerging countries are the future high growth affluent markets

Canada

Mexico

US

Australia

China

Hong Kong

India

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Russia, China, and India lead the way in terms of projected growth in the number of affluent customers. Datamonitor

expects these nations to grow at rates of 20%, 14.5%, and 13.2% respectively over 2010–14, as shown in Figure 11.

Strong growth in the number of affluent customers will create new demand for credit cards.

While Japan currently has the second largest number of affluent customers (with more than 45 million), future growth is

expected to be quite conservative, with Datamonitor predicting that the segment will grow at a CAGR of just 2.7% over

2010–14.

Profiling the Affluent Credit Card Customer



PROFILING THE AFFLUENT CREDIT CARD CUSTOMER

This chapter analyzes the behavior of affluent customers towards credit cards and, more importantly, outlines the key

differences in their behavior relative to the mass market consumer segment.

Affluent customers have access to a wide range of card products

Affluent customers hold more credit cards per person than the average credit card customer

Affluent customers have access to a number of credit cards, at a slightly higher level than the average credit card

customer. Indeed, affluent customers hold 20% more credit cards than the overall market average. This outcome was

consistent across the 20 countries compared in Datamonitor's Financial Services Consumer Insight (FSCI) Survey 2011.

Overall, affluent customers in Asia Pacific hold more credit cards than customers in other countries. Figure 12 clearly

shows this trend: the leading six countries in terms of credit cards per affluent customer are from the Asia Pacific region.

The difference in credit card holding between affluent customers in Asia Pacific and other countries is primarily due to both

strong consumer demand and the different types of offers available from card issuers.

Figure 12: Affluent customers hold more credit cards than the average customer

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Number of cards per credit card customers

Affluent customers Overall average





Affluent customers in Singapore hold the highest number of credit cards, averaging 4.4 per person. Credit card acquisition

in Singapore is strongly influenced by exclusive discount offers, which vary across the different card issuers. Such offers,

which provide cardholders with access to specific retail discounts (among other benefits), become the point of

differentiation for Singaporean customers, and help drive the high number of credit cards held per person in the country.

On the other hand, affluent customers in Europe typically hold between one and two cards, with France, Germany, and the

Netherlands recording the lowest levels of credit card holding per affluent customer. This mirrors the wider trend towards

credit card holding and usage in these countries.

The majority of affluent customers are active credit card users, but attachment levels vary globally

One consequence of consumers having multiple cards is that it is harder for card issuers to get their products to the top of

the customer wallet. As a result, the primacy rate on premium cards tends to be low in those countries with high credit card

product holding among affluent customers. However, while this is generally true in most countries, there are some

exceptions.

To explore this, Datamonitor analyzes four different card usage behavior profiles.

• Primary card only – Affluent customers with a primary card and no other credit card used for new

transactions (including those with cards, but who are less inclined to use them for new transactions).

• Primary card user with a backup card – Affluent customers with a primary card and one or more

secondary cards.

• Multi-card – Affluent customers with multiple active cards that they use more or less equally.

• Non-active – Affluent customers who do not use their credit card for new transactions.

Across these four different card user groups, both non-active and multi-card users represent a challenge to the industry,

particularly in terms of influencing the primary card of such customers. Figure 13 shows the composition of affluent credit

card customers for each country across these four user groups.




Figure 13: Affluent customers in France have the greatest attachment to a single credit card, while those in

Singapore are most likely to use multiple cards

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Affluent credit card customers and their card usage

Non-active

Multi-card

Primary card user with a back up card

Primary card only


Across the 20 countries compared in Datamonitor's survey, affluent credit card customers in France are the largest group of

primary card only users. In this market, 52% of affluent credit card customers use only one card, treating it as their primary

card. This reflects the fact that revolving credit card holding in France remains relatively limited. Clearly, if an issuer has a

relationship with a consumer in this market, then it is likely they will remain that customer's primary card provider. The same

trend is present in the Netherlands, Italy, Germany, and Brazil.

In contrast, South Korea has a high proportion of primary card users with backup cards. Individuals in this segment use one

card for most of their transactions, but also have supplementary cards for other purposes, and may therefore be attractive

for issuers looking to offer cards to new customers. However, the challenge here is how to move from being a

supplementary card to a primary card. The size of this card segment is similar across Japan, Canada, and South Africa.

Multi-card users are dominant in Singapore, and represent 33% of affluent credit card customers, the largest percentage

across the 20 countries studied. As mentioned earlier, exclusive discounts and offers are one of the drivers pushing card

transactions across multiple cards. This is the key challenge for many card issuers in the Asia Pacific region.




Russia and the Netherlands hold the largest population of non-active users, with 29% and 26% of affluent credit card

customers respectively. The scale of unengaged cardholders is a significant challenge to issuers in these markets, as well

as a potential opportunity to provide compelling new offerings.

The minority of affluent customers make up the majority of revenue

One of the key findings from Datamonitor's Global Credit Card Revenue Model is the fact that 91% of transaction income

comes from the top 20% of customers. This highlights the value of affluent customers within the overall consumer base.

Interestingly, the findings do not necessarily exclusively correlate to customers' levels of wealth, but a high correlation is

also found in the level of a card's primacy. Primacy is important for card issuing business, with a majority of customers

having multiple cards that they use for various different purposes. This provides further evidence to suggest that issuers

should focus on the affluent customer segment.




Affluent customers show strong demand for credit cards

Affluent customers are more likely to look for a new credit card than mass market consumers

The affluent segment is more likely to look for a new credit card than the mass market, with the UK the only country where

the overall average is higher than the figure for the affluent segment. At a global level, 26% of affluent credit card

customers are likely to look for a new credit card in the next six months. This is higher than the overall market, with an

average of 20% of consumers planning to look for a new card. The spread is also vastly different between countries.

Chinese affluent customers are the most likely to look for a new credit card (50%), while affluent customers in the

Netherlands are the least inclined to do the same (7%).

The high proportion of affluent customers who are likely to look for a new credit card represents a clear opportunity for card

issuers to attract new customers, or even for new players to enter the market. However, it also represents a risk to

incumbent players, as such issuers may see significant shifts in their portfolios if customers' intentions translate into action.

Figure 14: The high proportion of customers who look for new credit cards represents both an opportunity

and a threat

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"How likely are you to look for a new credit card in the next 6 months?"

Affluent customers Overall customers





Affluent customers are better informed about credit card products than the mass market

Overall, affluent customers are better informed when it comes to making their credit card decisions, and use various

channels to gather information about products. Across all channels, affluent customers conduct more product research than

mass market customers.

The branch still remains the main source of information for affluent credit card customers, 25% of who speak to branch

staff. Affluent customers also show a more aggressive approach in researching their products, with 25% using multiple

sources of information, compared to 19% of mass market customers.

Figure 15: Affluent customers are better informed about credit card products than mass market customers

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Consult with family and

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Affluent cardholders behave differently from the mass market in two key ways

Affluent customers spend 3.2 times more on their credit cards than mass market customers

Affluent customers consistently spend more on their credit card than mass market customers, with significant behavioral

differences noticeable in terms of both spending power and payment card preferences.

On average, affluent credit card customers spend 3.2 times more on their card than mass market customers, as shown in

Figure 16, with the exception of Spain, where mass market customers are slightly ahead of affluent customers in monthly

spending.

Australian affluent customers spend more relative to the mass market than any of the 20 countries compared. This is

predominantly due to the economic stability in the country over the last three years, and the strength of the Australian dollar

relative to the US dollar, which provides an extra boost to monthly spending for both affluent and mass market customers.

This higher level of credit card monthly spending shows the strong business case for card issuers to focus on targeting

affluent customers, especially those looking to increase revenues from transaction/interchange fees.

Figure 16: Affluent customers spend 3.2 times more on their credit cards than mass market customers

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Travel, food and drink, and fuel expenses lead the way in terms of credit card usage among affluent

customers

Travel, food and drink, and fuel are the three leading categories in terms of affluent credit card customer spending. This is a

consistent trend across most of the 20 countries in this report, with first place evenly split between travel-related expenses

and food and drink. In the UK, fuel is the leading category, which shows the importance of this sector to the end users.

Food and drink accounts for 28.8% of monthly credit card spending in Japan, more than double the level in other countries.

This differentiates affluent Japanese customers from the rest of the world, and signifies the importance of the nation's card

issuers successfully leveraging high card usage in this category as part of customer acquisition strategies.

Figure 17: Travel, food and drink, and fuel expenses are the three leading categories of credit card usage

among affluent customers

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Downloads of music, games, mobile appsCDs/Videos/DVDs/games

Books

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DIY and gardening products

Electrical goods

Health & beauty

Clothing & footwear

Food & drink


In Singapore, 15.9% of customer spending is travel-related, nearly twice as high as the next category. As an island country

and one of the major Asian travel hubs, Singaporean affluent customers have access to major destinations outside of the

country.




Affluent customers are more open to new payment innovations than the mass market

Affluent customers are more open to new payment innovations than mass market customers. In the following sections,

Datamonitor looks at two different emerging payment types: contactless cards and near-field communication payments.

One in four affluent customers have used contactless payments

Consumer attitudes towards contactless payments can be segmented into five different groups.

• Active user – Consumers who have a contactless card and use it.

• Passive user – Consumers who have a contactless card and do not use it.

• Demand – Consumers who do not have a contactless card but do want one.

• Resistance – Consumers who do not have a contactless card and do not want one.

• Unaware – Consumers who have never heard about contactless cards.

Overall, 25% of affluent customers globally have used contactless payments in the last 12 months (from June 2011),

significantly higher than in the mass market, where only 16% of customers used the contactless method within the same

period.




Figure 18: One in four affluent customers have used contactless payments

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Consumer attitudes towards contactless payments

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Of those consumers who indicated that they would like to use contactless payments, 31% in both the mass market and the

affluent segments indicated that they do not have a contactless card at present, but would like one in the future. This

suggests that there is sizable demand for contactless payment methods among affluent customers, which is something

card issuers should explore.

Affluent customers are also more up to date with new payment technologies. Only 17% of affluent customers have not

heard about contactless payments, in comparison to 27% among the mass market.

Affluent customers are more open to using a mobile phone for banking-related services

Across different technology-driven innovations in financial services, affluent customers are more receptive than mass

market customers; the surge in usage of smartphones among global consumers has become an important reason for

banks and issuers to leverage this fact within their products and services.

For the cards and payments industry, smartphones play an important role in shaping the future of payments. One of the key

issues in today's market is the likelihood of consumers using their mobile phone for banking or payment-related services,

and Datamonitor believes that affluent customers have an important part to play.




Affluent consumers are more receptive than mass market customers when it comes to new payment services on mobile

phones. For example, the use of mobiles as a tool to provide location-based offers has been discussed in different

countries, as well as its potential implementation in the credit card space. A total of 56.5% of affluent customers indicated

they would be interested in these services, while only 49% of mass market customers felt the same. The situation is no

different in terms of mobile payments, with 66% of affluent customers interested in being able to pay for instore items with

their phone.

Figure 19: Affluent customers are more open to using mobile phones for banking-related services

61.3%

49.3%

66.2%

56.5%

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The ability to pay for things in shops with my mobile phone

The ability to receive offers through my mobile device based on my location

Proportion of consumers who are interested in the idea

Consumer views on new payment services through mobile phones

Affluent customers

Mass market customers


High levels of trust in banks drives the adoption of new services among affluent customers

A higher level of trust among affluent customers drives the adoption of new payment services, certainly more so than

among mass market customers. Figure 20 shows that affluent customers generally trust their credit card providers to act in

their best interests, or at least more so than mass market consumers in the same country. The only exception was

recorded in South Africa, where the trust levels of affluent consumers were slightly lower than the average credit card

customer.

Traditionally, trust plays a key role in the implementation of a new product or service. Issuers' credibility, combined with the

attractiveness of the product, help form a customer value proposition that impacts the overall level of adoption.




Figure 20: Affluent customers have higher levels of trust in their card issuers than the average consumer

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Affluent customers Overall customers


Sizing Global Premium Card Opportunities



SIZING GLOBAL PREMIUM CARD OPPORTUNITIES

This chapter looks at some of the opportunities for premium card issuers, based on analysis of the cardholding and usage

patterns of affluent credit card customers across 20 different countries.

While the penetration of credit card holding among affluent customers is generally high, there are still some gaps and a

great degree of variance in the usage of these cards. This creates a range of opportunities, which card issuers need to be

aware of in order to remain competitive.

Datamonitor's Premium Cards Opportunity Model sizes the target market for premium cards

The output of Datamonitor's Premium Cards Opportunity Model is the number of potential new premium card customers per

100 customers in a specific country. This provides relative opportunity figures across the 20 countries assessed in this

report.

To measure future demand for premium cards among customers, Datamonitor developed a model based on its Financial

Services Consumer Insight Survey 2011. The purpose of this model is to provide a view on the relative demand of premium

cards, to help card issuers prioritize their growth strategies and target different consumer segments.

The Premium Cards Opportunity Model identifies two key consumer groupings for premium cards

Customers who do not have a premium card and their views towards such products are the fundamental principle of


Among affluent customers who do not have a premium card, there are two main types of individual to target.

• Upgraders – Affluent customers who already have one or more credit cards, but do not have a premium

card. Within this segment, Datamonitor uses two other indicators, which are their likelihood to get a new

credit card and see rewards as an important factor on their new credit card, to reflect the likelihood of a

customer obtaining a premium card.

• New entrants – Affluent customers who do not have a credit card but may be interested in getting one.

Figure 21 illustrates the process involved in identifying upgraders and new entrants. These two consumer groups combined

represent the total addressable premium card opportunity.




Figure 21: There are two target growth areas for premium cards: affluent consumers without a premium

card and those with no credit card at all

Have a

credit card

Do not have a

premium card

Likely to look

for a new credit card

See loyalty and

rewards as an important

factor

Do not have a

credit card

Interested in a

credit card

Upgraders New entrants





Emerging countries will become high growth markets for premium card issuers


months

Demand for premium cards is expected to be strong in the next 12 months, as indicated by the top level findings from


Overall, 11 million affluent customers are expected to become premium card customers in the next 12 months, equivalent

to an 8.5% increase above current penetration levels. This means that 57.5% of affluent customers are expected to have

premium cards, an absolute increase of 4.5 per 100 customers.

This represents strong growth for the card industry within a segment that generates considerable revenue. Key to unlocking

this growth is understanding where it will be concentrated, as well as the source of the underlying demand for premium

cards.

Upgraders represent a bigger market opportunity than new entrants, but their loyalty may become an issue

Further analysis on different consumer groups shows that upgraders represent a bigger source of opportunity for new

affluent premium card customers than new entrants. Indeed, 6.9 million affluent customers are likely to upgrade their

standard card to a premium card in the next 12 months, while 4.1 million new entrants are expected over the same period.

However, upgraders represent both an opportunity and a threat to card issuers. After all, by their very nature their loyalty is

uncertain, as they have indicated that they are looking for a new card, one that is likely to be premium.

Affluent individuals without a credit card typically have their own reasons for not having one, and this creates a barrier to

providing them with a card. Interestingly, of the 11% of affluent customers who do not have a credit card, only 1.7% would

be interested in getting one, representing a higher conversion rate as a proportion of the potential population than

upgraders.




Figure 22: Upgraders represent the main source of growth for premium cards

Have one or

more credit

card?

Have one or more

premium cards

53%

Do not have a

premium card

36%

but WOULD be interested

in getting one

and WOULD NOT be

interested in getting one

2.8%

33.2%

Yes

89%

No

11%

but WOULD be interested

in getting one

and WOULD NOT be

interested in getting one

1.7%

9.3%

New entrants

Upgraders


The conclusion is that upgraders represent a bigger market opportunity than new entrants, despite the lower customer

conversion rate for premium cards.

There is also strong demand for premium cards among mass market customers, but affluent customers

should remain the priority

Traditionally, card issuers do not see mass market customers as their primary target for premium cards. However,

Datamonitor has seen strong demand for premium cards among mass market customers.

A total of 6.5 per 100 mass market customers have indicated a desire to obtain a premium card in the next 12 months. A

like for like comparison shows that mass market customers represent a bigger opportunity than affluent customers, but a

closer look reveals that the mass market customer segment may not be eligible for genuinely premium cards, and may

carry a higher lending risk than affluent customers. Demand may be high, but card issuers should understand that mass

market customers hold different characteristics than those highlighted in the first chapter of this report.

Emerging countries represent a high growth opportunity for premium cards

The opportunity for issuers and schemes to grow the affluent card market is significant, both in terms of converting affluent

consumers with standard cards to premium products and issuing cards to wealthy consumers who have no credit card at

present.

The three countries that offer the most attractive growth opportunity for premium cards as a proportion of the total of the

affluent population are Russia, Mexico, and Brazil. However, this is largely driven by the underlying growth forecasted for

the affluent population in these rapidly developing countries.




Figure 23: Emerging countries represent high growth for the premium card market

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

RussiaMexico

BrazilSouth Africa

PolandItaly

IndiaSpain

SingaporeAustralia

ChinaSouth Korea

GermanyUK

CanadaNetherlands

JapanSweden

Hong KongUS

FranceGlobal average



Do not want to upgrade Do not want a credit card


While upgraders and new entrants represent opportunities for premium card issuers, there are two consumer groupings

highlighted in Figure 23 that represent a significant challenge.

• Do not want to upgrade – Affluent customers who have a credit card, but are not interested in a premium

card.

• Do not want a credit card – Affluent customers who are not interested in a credit card.

Globally, 33% of affluent customers do not want to upgrade to a premium card, while 9.3% do not want a credit card.

Affluent customers in Russia are the most likely to become new premium card customers

Russia represents the most attractive opportunity, largely due to its premium card penetration rate of just 23%, which is the

lowest across all of the countries compared in this report. Datamonitor estimates that 13.1% of affluent customers in Russia

are likely to adopt premium cards in the next 12 months, representing a total addressable market of 281,000 new premium

card customers.




Russia's high population, high growth in the number of affluent customers, and low premium card penetration are the key

drivers influencing its attractiveness as a market for premium card issuers.

Despite existing high penetration, there is still strong demand for premium cards in Singapore

While affluent customers in Singapore have the highest premium card penetration across the 20 countries in this report, the

opportunity for premium cards still remains strong. Overall, 4.9% of affluent customers in Singapore are interested in taking

out a premium card in the next 12 months, which will mean that 86.4% of the country's affluent customers have at least one

premium card.

Debt aversion and the recent global financial difficulties are the two biggest reasons for affluent customers opting not to

hold a credit card in Singapore.

The high popularity of deferred debit cards represents challenges for premium card issuers in France

Premium card issuers in France face extra challenges, with the French market exhibiting the lowest opportunity for

premium cards. Overall, only 2.4 per 100 customers are likely to become new premium card holders in the next 12 months.

This is largely due to the market preference for deferred debit products, with revolving credit cards still limited. In 2010,

98% of transaction volume on pay later cards was accounted for by deferred debit and charge cards.

The preference for other payment options is a major barrier to the growth of premium cards in Mainland

Europe

Similar to the landscape for payment cards in France, many other European countries see debit, deferred debit, or charge

cards account for the majority of the overall card payment market. This feeds through into the low penetration rates of

premium cards seen in countries such as Germany, the Netherlands, and Sweden.

Indeed, the Netherlands and Sweden are the two countries with the highest proportion of affluent customers who do not

have a credit card and do not intend to take one out anytime soon (33% and 22% respectively).

The majority of affluent customers in Japan have a credit card, but are not interested in premium cards

While 95% of affluent customers in Japan have one or more credit cards, only 30% have a premium card. This suggests

that there is a significant untapped market to explore. However, Japan's affluent customers represent a strong challenge to

premium card issuers, with 62% indicating that they have a credit card but are not interested in premium cards, the highest

percentage across all 20 countries.

Not all card issuers benefit from upgraders

From the card issuer perspective, there are positive and negative consequences in targeting existing customers to upgrade

to a premium card. One of the benefits, which is applicable to most countries, is the interchange fee difference between

premium and standard cards. Premium cards tend to carry a higher interchange fee than standard cards, and therefore

provide higher revenue for identical transaction values. This difference in revenue should be taken into consideration in

each card issuer's profitability assessment.




On the other hand, one of the negative aspects of targeting upgraders is the unintended implication of assuming that

premium card customers carry a lower credit risk than standard card customers. Taking Brazil as a country with a relatively

high credit card interest rate, standard credit cards typically charge two to three times more than platinum cards. Card

issuers that upgrade standard credit card customers to premium cards can expect a lower level of revenue generated from

interest income, especially among customers who revolve their balance from month to month.

In addition, the cost of running a premium card will be higher than a standard card, especially for some additional features

such as rewards programs and invitation to exclusive events.

The US remains the largest addressable market for premium cards

While emerging countries represent a significant opportunity to convert affluent customers to premium cards, the absolute

size of the addressable market is relatively small in comparison to developed nations such as the US and Japan. While the

US and Japan already have high proportions of affluent customers using premium cards, the future addressable market is

still large.

Around 2.8% of the affluent customer base in the US is likely to get a premium card in the next 12 months, representing a

total addressable market of more than 2.5 million – nine times the total addressable market for Russia.

Figure 24: The US has the largest addressable market for premium cards

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

2

4

6

8

10

12

Nu

mb

er o

f aff

lue

nt c

usto

mers

(m

illio

ns)

Op

po

rtu

nity

per 1

00

aff

luen

t cre

dit

ca

rd c

usto

me

rs

Total opportunity (% of affluent consumers)

Addressable market size (number of affluent customers)





The top three countries, based on the size of the addressable premium card market, are the US, Japan, and China. Affluent

customers in these three nations account for 67.2% of total affluent customers across the 20 countries.

High growth in the number of affluent customers in emerging countries will provide strong future growth

While the US and Japan still dominate the number of opportunities for new premium card customers, strong growth in the

number of affluent customers in most emerging countries will provide a large future market for premium cards.

Datamonitor's Global Wealth Markets Database forecasts a compound annual growth rate (CAGR) of 20% in terms of the

number of affluent customers in Russia over 2009–14, while figures of 14.5% and 13.2% are expected in China and India

respectively. China, which is currently behind only the US and Japan in term of the potential number of new premium card

customers, will become a strong contender to outperform both these markets, as the US and Japan are expected to see

growth at a much slower rate up to 2014, with CAGRs of 6.8% and 2.7% respectively.

The Future of Premium Credit Cards



THE FUTURE OF PREMIUM CREDIT CARDS

This chapter assesses key developments and the future of premium cards. Datamonitor believes that product

developments in the premium credit card sector are focusing on two key areas.

• The traditional definitions of premium cards, which include gold and platinum cards, are slowly changing,

and there have been many developments to leverage high demand for premium cards among mass market

customers.

• Some card issuers have developed their premium card offerings, providing an extra level of benefits and

exclusivity to affluent customers.

The erosion of premium branding has not affected the targeting of affluent consumers

The high levels of credit card penetration have caused traditional premium brands to lose their exclusivity

The popularity of the credit card as a payment option among the mass consumer market has had an unfavorable

consequence for the premium card market. Exclusivity is one of the elements that card issuers use to differentiate their

offerings, and this comes under pressure when issuers reach out to the mass market.

Gold and platinum credit cards used to have restrictive requirements, such as high income requirements. Some still do, but

this is no longer the case for most products. Overall, 34.4% of mass market customers (who have total liquid assets of less

than $50,000) hold premium-branded credit cards (gold card and above). The popularity of premium cards among mass

market customers is even higher in Singapore, India, and Hong Kong, where more than half of customers in this segment

hold a premium-branded credit card.

Aggressive marketing through mass advertising and mainstream acquisition channels has enticed mass market customers

to move up on the hierarchy of credit card product brands, especially in countries where annual fees are relatively low and

premium-branded cards typically have low levels of application requirements.




Figure 25: There is a high penetration of premium-branded cards among mass market customers in many

countries

0%

10%

20%

30%

40%

50%

60%

70%

Pro

po

rtio

n o

f cu

sto

me

rs

Proportion of mass market customers with a premium credit card

Source: Datamonitor's Financial Services Consumer Insight Survey 2011 D A T A M O N I T O R

Gold credit cards are slowly disappearing from the market

The use of premium branding in mass market products has seen gold cards, as an intermediary level between standard

and platinum cards, slowly diminishing in value. As a result, the brand is beginning to disappear from the market. Certainly,

the devaluing of the exclusivity of the brand will have resulted in customers seeing this level as a premium card by name

only, one that does not offer the expected premium services. The argument can be seen more strongly in a market where

credit card annual fees are low. For example, all personal cards issued by the top five credit card issuers in Singapore

(DBS, OCBC, Citibank, UOB, and Standard Chartered) are standard card or platinum card, with gold credit cards no longer

offered as part of the product suite.

Similar evidence can also be seen in other markets, with issuers such as Bank of America in the US and Lloyds TSB in the

UK. Credit cards in the UK, the US, and Singapore typically do not have annual fees, or offer a certain waiver option. This

leads consumers to make simpler decisions when choosing credit cards, either opting for a standard product as offered by

a regular credit card, or a premium product with extra benefits such as a platinum card. Interestingly in Australia, where

annual fees are still commonly charged, ANZ is one of the few card issuers that does not offer a gold credit card as part of




its product suite for personal customers. Clearly, the use of premium branding as a means of customer segmentation only

really applies in cases where there is a pricing differential between each grade of product.

Datamonitor expects that gold credit cards will continue to slowly disappear from product suites in markets where annual

fees are not common.

Figure 26: Lloyd TSB and Standard Chartered in Singapore are two issuers that no longer offer gold credit

cards

Source: Datamonitor, Lloyds TSB, Standard Chartered D A T A M O N I T O R

Card issuers and schemes continue to target affluent consumers with post-platinum brands

While the brands have changed over time, the use of premium branding by issuers to segment their customer base has

continued. There have traditionally been several tiers of premium card above the platinum level, and these have yet to be

devalued in quite the same way.

Generally, there are two different levels of premium branding above platinum used to distinguish different customer levels

within the affluent segment. One is aimed at the mass affluent segment, while the other is ultra-exclusive products typically

offered by invitation only to a select group of high net worth customers.

While American Express has played a strong role in the ultra-premium cards space through its Centurion/Black brand,

there have been some developments from other card schemes in the last few years.




Table 1: Premium brands used by the main international card schemes

Visa MasterCard American Express

Standard Classic Standard Standard

Gold Gold Gold Gold

Platinum Platinum Platinum Platinum

Premium card levels above platinum

Signature World Platinum Reserve^

Infinite* World Elite/Signia Centurion*

* By invitation only

^ Only in selected countries

Source: Datamonitor, Visa, MasterCard, American Express D A T A M O N I T O R

Visa, the largest scheme in the world by number of cards, has two levels above platinum, those being Signature and an

invitation only level in its Infinite card series. MasterCard also offers two different levels, World and World Elite, both of

which are positioned above its platinum card offering. The role of card schemes in providing these different levels is mainly

to offer premium service packages to issuers, such as concierge services and exclusive event access, which have a

different level of value at each stage.

American Express, which being a card scheme and a card issuer has a unique position in the market, offers the Centurion

card (also known as the Black card) as its leading offering by invitation only. In some countries such as Australia and

Singapore, it also has a level above platinum but below Centurion, which is its Platinum Reserve card series.

All of these additional premium levels are differentiated from other offerings mainly on the quality of the services and

benefits available, which are typically supported by attractive rewards schemes provided by card issuers.

Cards branded above platinum offer differentiation, but some are at risk of losing their exclusive status

Most of the product developments in the above platinum credit card market are specifically designed to distinguish the

cards from platinum cards based on services and benefits, and are targeted at a small and exclusive customer group.

Indeed, Visa Signature, MasterCard World, and American Express Platinum Reserve are aimed at addressing the growing

issue of lack of differentiation for affluent credit card customers.

Visa Signature and MasterCard World are aimed at offering extra services

One of the main differentiators between platinum and genuine mass affluent products is the extra layer of services offered.

For example, Visa Signature cardholders have access to the 24/7 Visa Signature Concierge, which lifts the service up a




level relative to platinum cards. This is in addition to other bespoke offers for automatic upgrades and exclusive access,

which includes automatic upgrades on hotel rooms, automatic upgrades to first class from business class on airline tickets,

and access to special events and exclusive discount offers at different retailers.

Figure 27: Examples of the extra levels of services offered to attract mass affluent customers

Source: Datamonitor, MasterCard D A T A M O N I T O R

MasterCard World focuses on three different areas – travel, shopping, and entertainment – and in each area, cardholders

have access to exclusive offers across different countries. There are two aspects of the offerings that add extra value:

breadth and depth. As far as the World offering is concerned, there is a balance between the breadth and depth of the

exclusive services on offer, with most of the privileges available in the form of partnerships with retailers or service

providers.

While many card issuers have indicated that uptake on some of these exclusive offers is still quite low, this is seen as one

of the form factors that shape premium offerings among affluent customers.

However, card issuer uptake of the Visa Signature and MasterCard World brands has been slow

While the card schemes have provided support through additional levels of services tailored to the mass affluent segment,

few card issuers have opted to launch products above the premium level. However, if the ultra-premium offerings of

MasterCard and Visa give any indication as to overall card issuing activities, there is strong evidence of demand for

premium cards in the Asia Pacific region.

As an example, as of October 2011 there were only four card issuers in the UK offering MasterCard World, those being

Capital One, Egg, NatWest, and RBS (and the latter two are part of the same banking group), while Visa Signature is not

available in the UK market.




On the other hand, Datamonitor sees an increasing number of new product launches targeted at this segment in Asia

Pacific. Credit card issuers in Singapore, India, Hong Kong, and China have offered a number of ultra-premium credit

cards. The top five credit card issuers in Singapore offer multiple products utilizing the Visa Signature and MasterCard

World brands, highlighting the aggressiveness of the market when it comes to tapping into opportunities within this

consumer segment.

However, the pressure to use this branding to attract customers is devaluing such offerings

While there is a drive by card schemes to offer a stronger value proposition to mass affluent customers than the existing

gold and platinum card suites, there is a danger that card issuers may continue to devalue the exclusivity of these brands

by using them as a way to win customers from the mass market.

There are significant differences in the minimum requirements set by card issuers across different countries on cards

targeting mass affluent customers. Taking Visa Signature as an example, there is a big variance in the eligibility

requirements for this brand if the ratio of minimum annual income and median income is used as an indication.

In Australia, using the Citibank Select Visa Signature card as a guideline, the card requires A$120,000 ($120,288) as its

minimum income requirement, twice more than the Australian median income. Meanwhile, in India the Axis Bank Signature

credit card requires INR1,500,000 ($28,900), more than five times the Indian median income. Singapore has the lowest

requirement level out of the three countries, and a customer with annual income below the Singaporean median income

can qualify for the Visa Signature cards offered by Standard Chartered and UOB.

Table 2: A comparison of the minimum requirement guideline for Visa Signature in different countries

Product Minimum annual income guideline*

Median income* Minimum requirement to median income

ratio

Australia Citibank Select Visa Signature A$120,000 A$53,000 2.3

India Axis Bank Signature Credit Card

INR1,500,000 INR287,500 5.2

Singapore Standard Chartered PruPrestige Visa Signature

Credit Card

INR30,000 INR60,000 0.5

Singapore UOB Visa Signature Card S$50,000 S$60,000 0.8

* In local currency

Source: Datamonitor, Citibank, Axis Bank, Standard Chartered, UOB D A T A M O N I T O R




Individuality is the key to targeting niche affluent segments

Card issuers with leadership in a particular area are valued highly by affluent customers

In the highly competitive credit card market, issuers need to offer a strong value proposition in order to encourage

consumers not just to acquire a product, but to use it as their primary card. To do this, leadership in the offering – from

either a pricing or a service perspective – is key to building a strong affluent credit card customer portfolio.

Card issuers need to rebalance their strategies to offer the best breadth or depth of premium services

Affluent customers are not necessarily more profitable than the mass market, especially when one considers the cost of

rewarding this particular customer segment. Indeed, card issuers need to take into account the cost of providing both card

benefits and the level of customer service expected by this customer group.

Premium cards are expected to come with premium features and services to attract premium customers. In delivering such

products, there are two types of cost: platform costs and delivery costs, which together can result in very high total costs.

As indicated by the head of cards from one of the major card issuers in Singapore, platform costs (the cost to make the

features available) can be substantial, potentially higher than the running cost of the extra features. The two aspects of the

program – the breadth and depth of the offering – are what drive the cost of servicing affluent clients. The cost of the

platform to provide a rewards program can be high, and it is even higher when a card issuer decides to compete on being

the most comprehensive rewards issuer in a market.

In many countries, such as Australia, 40–60% of reward point redemptions are used towards cash/shopping vouchers,

while travel-related redemption such as airline points and other travel bookings come in second. This suggests that issuers

should review their position in the market, and aim to become a leader either in the breath of service (comprehensive

options for redemptions) or the depth of offerings (the best when it comes to redeeming points in a particular reward

category such as vouchers or travel rewards).

Leveraging mobile technology can improve the customer experience

As highlighted in the second chapter, affluent customers are more open to new innovations in the payment sector

(especially in emerging payments) than mass market customers. This opens up new opportunities for card issuers to

leverage these technologies when delivering new services to the affluent segment.

However, card issuers need to understand one important aspect: simplicity. Affluent customers are typically time-poor –

according to the Datamonitor report Mass Affluent Banking (February 2011, CM00072-001) they are the most time-

pressured type of customer – and thus crave simplicity. This factor combined with the availability of new technologies can

create significant opportunities for affluent providers.

One such examples is the use of smartphones to distribute special offers that are available exclusively to premium

cardholders. Location-based offers provide a tailored approach towards treating customers differently, adding value by

delivering the right offer to the right person at the right time, which is the key to targeted marketing.




In the affluent space, this would represent an important delivery improvement to many of the VIP invitations available, such

as VIP retail invitations when consumers are near high-end fashion stores.

In the affluent space it is not about discounts or reward points, but about the benefits and experiences that can be provided

by merchants that are attractive to the customer base. Mobile technology will allow issuers to look at the individual interests

of consumers and then tailor offers at specific segments.

Invitation only cards provide additional exclusivity for high net worth customers

While restrictive requirements on some products work to provide the mass affluent segment with an extra degree of

exclusivity, invitation only cards not only provide exclusivity for high net worth customers, but also confer status that not

many people can achieve. This is the reason why there is still a market for invitation only cards.

The American Express Centurion card effectively created and popularized this market, and was followed by many others,

most of which are linked to the private banking arm of a financial institution. Interestingly, Datamonitor finds that many of

the recent developments pertaining to this type of card have occurred in Asia Pacific.

DBS and Citibank launched invitation only cards in Singapore

In March 2011, DBS Singapore launched the DBS Insignia, a card dubbed as a million dollar card. It is an ultra-exclusive

credit card for high net worth customers in Singapore, and has a minimum credit limit of $785,000 (S$1m). The card, which

is available to select customers only, is a Visa Infinite offering, and is also Visa's leading offering for high net worth

customers.

The DBS Insignia card joined the Citibank Ultima card in the invitation only product space when it was relaunched in

October 2010. Citibank brings the private banking relationship model to the credit card space, with dedicated relationship

managers working with cardholders to assist with their lifestyle and personal needs.

HDFC Bank launched a limited number of invitation only cards in India

HDFC Bank, the largest credit card issuer in India, launched the country's first ultra-premium credit card, Infinia, to target

high net worth customers. The card, which comes with no spending limit, was initially launched to a select 5,000

individuals.

Datamonitor believes the number of Indian affluent customers is set to grow substantially in the years to come,

representing strong future demand for the premium card sector.

Unique services will provide a point of differentiation for the affluent segment

While most premium cards have similar premium services offered through the card schemes, card issuers need to provide

a point of differentiation to add extra appeal to their target market within the affluent segment. Targeting niche affluent

segments with features and services tailored to their needs would position the product not just as a primary card, but also

help build loyalty and potentially create cross-selling opportunities for other financial products.




The OCBC Elite World Card discounted airfare feature is designed to position the product as the

customer's primary card

The OCBC Elite World Card, which was launched in Singapore on September 2010, provides a one-off 50% rebate of up to

S$3,000 ($2,313) towards the cost of a business class ticket on any airline. There are certain conditions that must be met,

one of which requires the cardholder to charge a minimum of S$75,000 ($57,800) during the qualifying period to their

OCBC Elite World card. The qualifying period lasts for 12 months.

This offer supports the company's strategy of targeting active card users and building a profitable customer base in the

highly competitive credit card market.

Unique or distinctive card appearance provides special status to cardholders

While product features and additional services add real benefits and functionalities for cardholders, appearance can also be

an invaluable differential, especially for cardholders who appreciate the privilege of having a premium card.

A metal card (as opposed to one made of plastic) is one of the most recognizable premium features, and is offered for a

handful of invitation only cards, such as the American Express Centurion card, the J.P. Morgan Palladium card, and the

DBS Insignia card. The American Express Centurion card is made from titanium, while J.P Morgan named its card after the

palladium metal used for the product.

Figure 28: Metal cards help convey a special status

Source: Datamonitor, DBS, J.P. Morgan D A T A M O N I T O R

Bank of Communications offers a personal designated driver service to platinum card holders

In China, Bank of Communications offers a personalized service to cardholders who are unable to drive their car home due

to alcohol consumption. The Bank of Communications Platinum card provides a free driver service to cardholders up to six

times a year for a maximum distance of 50km per journey. Cardholders need to book 90–120 minutes in advance to take

advantage of the service.

While offering such a service may not fit with the corporate image issuers in some markets have cultivated, it does highlight

the need for issuers to understand the needs and expectations of the affluent customer segment and build a strong

customer proposition to target it.

Appendix



APPENDIX

Supplementary data

Table 3: Affluent customers across different countries, 2011

Number of affluent customers Proportion of affluent customers

US 91,401 29.29%

Japan 45,486 35.79%

China 27,001 2.01%

South Korea 13,801 28.17%

Germany 13,162 16.16%

UK 9,262 14.82%

Italy 7,963 13.11%

France 7,555 11.93%

Spain 5,285 11.30%

Canada 3,705 10.78%

India 3,679 0.31%

Australia 3,017 13.35%

Russia 2,147 1.51%

Hong Kong 2,141 30.06%

Netherlands 2,036 12.19%

Brazil 1,788 0.91%

Sweden 1,317 13.92%

Singapore 956 18.67%

Mexico 816 0.72%

South Africa 743 1.49%


Appendix



Table 4: Credit card penetration across different countries, by segment, 2011


Canada 97.23% 83.85%

Hong Kong 95.73% 76.45%

Japan 94.95% 87.96%

South Korea 94.64% 84.46%

Singapore 93.73% 76.10%

US 93.71% 74.97%

China 93.60% 79.34%

Brazil 92.34% 82.03%

Mexico 91.15% 73.00%

UK 90.83% 68.58%

Global average 89.05% 70.21%

Spain 89.01% 77.20%

France 87.35% 85.17%

Australia 84.51% 69.26%

Italy 84.23% 67.01%

India 83.58% 56.95%

Germany 81.31% 58.45%

Sweden 76.11% 62.68%

South Africa 74.82% 65.66%

Russia 73.57% 53.20%

Netherlands 64.38% 45.79%


Appendix



Table 5: Penetration of premium cards among affluent credit card customers, 2011

Percentage of premium cards

Singapore 86.92%

India 85.59%

Hong Kong 81.85%

China 80.03%

South Africa 72.12%

US 66.95%

South Korea 63.97%

Brazil 62.56%

Global average 59.51%

Mexico 55.34%

UK 53.75%

Canada 53.25%

Australia 50.56%

Spain 41.36%

Germany 37.93%

France 37.38%

Netherlands 33.98%

Japan 31.93%

Italy 31.53%

Sweden 27.74%

Russia 23.30%


Appendix



Table 6: Annual revenue per credit card customers across different countries ($), 2011

Affluent Mass market

Global 203.5 150.6

Sweden 83.9 80.5

Germany 125.5 96.7

Spain 134.0 134.8

Japan 139.3 82.4

Italy 142.4 123.9

Russia 146.9 125.0

Netherlands 149.7 83.1

South Africa 158.4 104.3

India 163.6 87.7

France 168.8 127.2

Hong Kong 188.5 128.2

UK 193.0 178.8

Singapore 204.6 172.3

US 218.9 169.6

South Korea 223.5 146.1

China 231.9 138.8

Brazil 256.4 185.9

Mexico 279.4 248.7

Canada 282.4 189.0

Australia 498.8 386.3


Appendix



Table 7: Annual revenue per affluent credit card customers, by source of income ($), 2011

Fee income Transaction fee income Interest income

Sweden 36.1 26.6 21.5

Germany 73.7 36.7 15.4

Spain 71.5 11.2 51.4

Japan 63.3 74.4 1.6

Italy 64.1 17.0 61.2

Russia 84.2 6.3 56.3

Netherlands 57.5 80.8 11.0

South Africa 40.6 58.6 59.0

India 50.2 24.9 88.5

France 135.1 6.5 27.7

Hong Kong 104.7 58.0 25.7

UK 24.2 97.7 71.2

Global 74.7 92.4 36.4

Singapore 118.1 71.3 15.4

US 23.5 127.8 67.6

South Korea 25.5 186.3 11.8

China 170.9 54.5 6.5

Brazil 67.6 29.0 159.7

Mexico 66.3 64.3 148.9

Canada 54.8 169.1 58.5

Australia 146.7 191.5 160.6


Appendix



Table 8: Affluent credit card customers and their primacy, 2011

Primary card only Primary card user with a backup card

Multi-card Non-active

France 51.9% 25.7% 6.1% 16.4%

Netherlands 49.5% 22.3% 1.9% 26.2%

Italy 46.8% 21.7% 6.9% 24.6%

Germany 46.0% 24.1% 4.6% 25.3%

Brazil 40.0% 25.4% 14.5% 20.1%

Australia 39.4% 36.7% 6.9% 16.9%

UK 35.8% 44.3% 7.2% 12.7%

South Africa 35.6% 47.1% 3.8% 13.5%

Russia 35.0% 30.1% 5.8% 29.1%

Canada 34.1% 48.8% 7.7% 9.3%

Spain 34.0% 35.8% 15.4% 14.8%

Global average 30.3% 39.1% 15.6% 15.0%

US 30.1% 44.2% 12.8% 13.0%

Sweden 29.2% 40.9% 13.9% 16.1%

Mexico 28.2% 35.0% 19.4% 17.5%

Japan 23.5% 51.8% 14.3% 10.4%

China 21.2% 40.8% 26.5% 11.5%

Hong Kong 18.2% 40.4% 21.7% 19.7%

India 17.9% 42.4% 27.9% 11.8%

South Korea 17.0% 53.8% 19.0% 10.1%

Singapore 15.7% 44.5% 32.6% 7.3%


Appendix



Table 9: Monthly credit card spend, by segment ($), 2011


Australia 2,063 537

Netherlands 1,131 162

Canada 803 178

UK 715 118

US 546 159

Global average 511 158

South Korea 474 319

Singapore 429 197

Germany 408 231

Hong Kong 386 141

China 386 154

Sweden 381 118

Mexico 272 74

Japan 245 112

South Africa 243 58

Italy 239 136

France 222 71

Brazil 187 96

Spain 168 184

India 158 48

Russia 100 22


Appendix



Table 10: Potential upgraders and new entrants to the premium card market, by country (percentage of

consumers), 2011


Do not want to upgrade

Do not want a credit card

Russia 8.6% 1.4% 17.1% 47.9% 25.0%

Mexico 5.3% 3.5% 50.4% 35.4% 5.3%

Brazil 5.3% 2.8% 57.8% 29.3% 4.8%

South Africa 2.9% 4.3% 54.0% 18.0% 20.9%

Poland 2.3% 4.5% 36.4% 31.8% 25.0%

Italy 2.9% 3.3% 26.6% 54.8% 12.4%

India 2.9% 3.3% 71.5% 9.1% 13.1%

Spain 3.8% 2.2% 36.8% 48.4% 8.8%

Singapore 2.7% 2.2% 81.5% 9.5% 4.1%

Australia 2.1% 2.6% 42.7% 39.7% 12.9%

China 3.8% 0.6% 74.9% 14.9% 5.8%

South Korea 3.4% 0.4% 60.5% 30.7% 5.0%

Germany 0.5% 3.3% 30.8% 50.5% 15.4%

UK 2.4% 0.9% 48.8% 39.6% 8.3%

Canada 2.8% 0.4% 51.8% 42.7% 2.4%

Netherlands 0.6% 2.5% 21.9% 42.5% 33.1%

Japan 2.7% 0.3% 30.3% 62.0% 4.8%

Sweden 0.6% 2.2% 21.1% 54.4% 21.7%

Hong Kong 1.8% 0.9% 78.4% 15.5% 3.4%

US 1.8% 0.8% 62.7% 29.2% 5.5%

France 1.2% 1.2% 32.7% 53.5% 11.4%

Global average 2.8% 1.7% 53.0% 33.2% 9.3%


Appendix



Table 11: Level of opportunity and addressable market size for new premium card customers, by country,

2011

Total opportunity (percentage of affluent consumers)

Addressable market size (number of affluent customers)

Russia 10.0 214,668

Mexico 8.8 72,199

Brazil 8.1 144,785

South Africa 7.2 53,439

Italy 6.2 495,650

India 6.2 228,260

Spain 6.0 319,444

Singapore 4.9 46,873

Australia 4.7 141,660

China 4.4 1,185,728

South Korea 3.8 528,786

Germany 3.7 492,035

UK 3.3 301,439

Canada 3.2 117,146

Netherlands 3.1 63,618

Japan 2.9 1,330,716

Sweden 2.8 36,574

Hong Kong 2.7 58,737

US 2.6 2,410,159

France 2.4 185,023

Global average 4.5 11,050,693


Appendix



Methodology

Datamonitor's Global Credit Card Revenue Model analyzes card issuer revenue from three different sources

Datamonitor's Global Credit Card Revenue Model utilizes multiple primary sources of information to estimate and validate

credit card issuer revenue for each country and customer segment. This model predominantly uses data from three

different sources.

• Datamonitor's Global Payment Cards Analyzer – This provides market insight into the overall size of

payment cards across 21 countries.

• Datamonitor's Financial Services Consumer Insight (FSCI) Survey – This adds extra depth to customer

behavior findings, focusing on consumers' attitudes towards payment cards.

• Datamonitor's Global Wealth Markets Database – This provides a comprehensive insight as to the size

of the affluent market segment, as defined based on liquid assets.

Figure 29: Datamonitor's Global Credit Card Revenue Model

Feeincome

Transaction income

Interestincome

Global Credit Card Revenue Model

Datamonitor Global Payment Cards Analyzer

Datamonitor Financial Services Consumer Insight Survey

Datamonitor Global Wealth Markets Database

Secondary source data


In determining the total revenue for all card issuers in the country, Datamonitor's Global Credit Card Revenue Model

estimates total revenue in the three different categories: fee income, transaction income, and interest income.

Fee income

Annual fees are an important source of income, but are not the only fee contributing to the fee income total. Other fees,

such as exception fees – which include over limit fees and late payment fees – also make up overall fee income. For the

purposes of this study, Datamonitor assumes annual fees are the main source of fee income, and excludes other fees from

the assessment.

Appendix



Annual fee data was collected for each country, to represent two different credit card levels: standard and premium credit

cards.

Transaction fee income

Income sourced from interchange fees makes up the transaction fee income for credit card issuers. The level of

interchange fees vary for different countries, card products, merchant types, and schemes. Interchange fees on credit cards

are typically a percentage of the transaction value, while some variations (almost always occurring on debit/pay now cards)

include a small fixed amount fee plus a percentage of the transaction values.

The interchange fees are typically different between standard credit cards and premium credit cards (gold card and above).

Datamonitor calculates transaction fee income based on the interchange fee data collected for different countries,

combined with consumers' transaction data from Datamonitor's FSCI Survey 2011, which includes frequency of transaction

and transaction value for the two consumer segments (affluent and mass market customers).

Interest income

Standard and promotional borrowing rate data were collected for each country surveyed in this study and used in

conjunction with data on average balances outstanding and the revolve rate for credit card customers from Datamonitor's

FSCI Survey. As a result, Datamonitor's Global Credit Card Revenue Model calculates the revenue sourced from interest

income for each country and customer group.

A lot of card issuers rely heavily on interest income to run their business, meaning that understanding this revenue stream

is an important aspect of the model.

Primary and secondary research

• Primary research interviews – In preparation for this report, Datamonitor carried out primary research

interviews with key players in the premium cards sector. The information gathered from the interviews

provided an invaluable input to the analysis.

• Primary research survey – This report uses data from Datamonitor's FSCI Survey conducted in June

2011. The survey was carried out online across 21 countries, those being Australia, Brazil, Canada, China,

France, Germany, Hong Kong, India, Italy, Japan, Mexico, the Netherlands, Poland, Russia, South Africa,

Singapore, South Korea, Spain, Sweden, the UK, and the US. The total sample size is over 27,000

respondents.

• Secondary research – Extensive secondary research was also conducted, ensuring the accuracy of the

information included. Statistical sources were used to provide background to the analysis.

Further reading

Datamonitor (2011) Contactless Payments: Waving Cash Goodbye, October 2011, CM00139-003

Datamonitor (2011) NFC Payments: Tapping the Future, June 2011, CM00139-006

Datamonitor (2011) Opportunities in Prepaid Cards, February 2011, CM00036-010

Appendix



Datamonitor (2011) Mass Affluent Banking, February 2011, CM00072-001

Datamonitor (2010) Australian Credit Card Consumers 2010, October 2010, CM00012-003

Datamonitor (2010) Contactless, Mobile, Online and Prepaid in the UK 2010, June 2010, BFFS0822

Ask the analyst

The Datamonitor Knowledge Center Writing team can be contacted at [email protected]

Disclaimer

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,

electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the

findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith

from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such

Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be

incorrect.

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