Premium Cards: Targeting Affluent Consumers

The affluent consumer segment has always been an attractive target market for the financial services 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.Use these insights into the behaviour of affluent credit card customers across 20 countries to shape your acquisition strategy.Successfully target affluent credit card customers by understanding what they want and how they use payment cardsBetter target the niche affluent consumer segment by understanding successful strategies to approach new premium card customersSee the size of the prize from winning new affluent customers, in 20 countriesPerhaps 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.Demand for premium cards is expected to be strong in the next 12 months, as indicated by 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 above the current premium card penetration level.Traditional premium cards, which include 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.How big is the premium card market, and how much revenue do these cards generate compared to the mass market?What are the key differences and why the affluent credit card customers behave differently to the mass market?What is the expected growth for the premium card market and where will the growth come from?What is the future of premium cards?

Global Credit Card Industry

OVERVIEW
•Catalyst
•Summary
EXECUTIVE SUMMARY
•Assessing the attractiveness of the affluent customer segment
- Defining different credit card customers and credit card products
- Affluent consumers are a sizable group, and are currently well-served by card issuers
- Affluent credit card customers are crucial to issuers
- Fee and transaction fee income dominate affluent credit card customer revenue
- Emerging countries represent the future high growth affluent markets
•Profiling the affluent credit card customer
- Affluent customers hold more credit cards per person than the average credit card customer
- The minority of affluent customers makes up the majority of the revenue
- Affluent customers are more likely to look for a new credit card than mass market consumers
- Affluent cardholders behave differently from the mass market in two key ways
•Sizing global premium card opportunities
- Datamonitor's Premium Cards Opportunity Model sizes the target market for premium cards
- Overall, 11 million affluent customers are expected to become premium card customers in the next 12 months
- Emerging countries represent a high growth opportunity for premium cards
- The US remains the largest addressable market for premium cards
•The future of premium credit cards
- The high levels of credit card penetration have caused traditional premium brands to lose their exclusivity
- Card issuers and schemes continue to target affluent consumers with post-platinum brands
- Unique services will provide a point of differentiation for the affluent segment
ASSESSING THE ATTRACTIVENESS OF THE AFFLUENT CUSTOMER SEGMENT
•Defining different credit card customers and credit card products
- This report examines both the affluent customer group and the products designed to serve it
•Affluent consumers are a sizable group, and are currently well-served by card issuers
- The US represents the largest market of affluent customers
- Demand for credit cards is high among affluent customers
- However, premium card penetration is low among affluent credit card customers in some countries
•Affluent credit card customers are crucial to issuers
- The average affluent credit card customer generates 35% more revenue than the average mass market customer
- Fee and transaction fee income dominate affluent credit card customer revenue
- Affluent customers will drive the future growth of credit cards
PROFILING THE AFFLUENT CREDIT CARD CUSTOMER
•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
- The majority of affluent customers are active credit card users, but attachment levels vary globally
•Affluent customers show strong demand for credit cards
- Affluent customers are more likely to look for a new credit card than mass market consumers
- Affluent customers are better informed about credit card products than the mass market
•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 are more open to new payment innovations than the mass market
SIZING GLOBAL PREMIUM CARD OPPORTUNITIES
•Datamonitor's Premium Cards Opportunity Model sizes the target market for premium cards
- The Premium Cards Opportunity Model identifies two key consumer groupings for premium cards
•Emerging countries will become high growth markets for premium card issuers
- Overall, 11 million affluent customers are expected to become premium card customers in the next 12 months
- Emerging countries represent a high growth opportunity for premium cards
- Not all card issuers benefit from upgraders
•The US remains the largest addressable market for premium cards
- High growth in the number of affluent customers in emerging countries will provide strong future growth
THE FUTURE OF PREMIUM CREDIT CARDS
•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
- Card issuers and schemes continue to target affluent consumers with post-platinum brands
•Cards branded above platinum offer differentiation, but some are at risk of losing their exclusive status
- Visa Signature and MasterCard World are aimed at offering extra services
- However, the pressure to use this branding to attract customers is devaluing such offerings
•Individuality is the key to targeting niche affluent segments
- Card issuers with leadership in a particular area are valued highly by affluent customers
- Invitation only cards provide additional exclusivity for high net worth customers
- Unique services will provide a point of differentiation for the affluent segment
APPENDIX
•Supplementary data
•Methodology
- Datamonitor's Global Credit Card Revenue Model analyzes card issuer revenue from three different sources
- Primary and secondary research
•Further reading
•Ask the analyst
•Disclaimer

TABLES
•Table: Premium brands used by the main international card schemes
•Table: A comparison of the minimum requirement guideline for Visa Signature in different countries
•Table: Affluent customers across different countries, 2011
•Table: Credit card penetration across different countries, by segment, 2011
•Table: Penetration of premium cards among affluent credit card customers, 2011
•Table: Annual revenue per credit card customers across different countries ($), 2011
•Table: Annual revenue per affluent credit card customers, by source of income ($), 2011
•Table: Affluent credit card customers and their primacy, 2011
•Table: Monthly credit card spend, by segment ($), 2011
•Table: Potential upgraders and new entrants to the premium card market, by country (percentage of consumers), 2011
•Table: Level of opportunity and addressable market size for new premium card customers, by country, 2011

FIGURES
•Figure: Datamonitor's definition of premium products and affluent customers
•Figure: Emerging countries represent high growth for the premium card market
•Figure: Datamonitor's definition of premium products and affluent customers
•Figure: The US is the largest market for affluent customers
•Figure: Credit card penetration is higher among affluent customers than mass market customers
•Figure: 60% of global affluent credit card customers have a premium credit card
•Figure: High inequality of wealth distribution creates demand for exclusivity
•Figure: Affluent credit card customers generate more revenue per head than the mass market
•Figure: Fee-derived income accounts for the majority of revenue from affluent credit card customers
•Figure: Source of income differs substantially between countries
•Figure: Emerging countries are the future high growth affluent markets
•Figure: Affluent customers hold more credit cards than the average customer
•Figure: Affluent customers in France have the greatest attachment to a single credit card, while those in Singapore are most likely to use multiple cards
•Figure: The high proportion of customers who look for new credit cards represents both an opportunity and a threat
•Figure: Affluent customers are better informed about credit card products than mass market customers
•Figure: Affluent customers spend 3.2 times more on their credit cards than mass market customers
•Figure: Travel, food and drink, and fuel expenses are the three leading categories of credit card usage among affluent customers
•Figure: One in four affluent customers have used contactless payments
•Figure: Affluent customers are more open to using mobile phones for banking-related services
•Figure: Affluent customers have higher levels of trust in their card issuers than the average consumer
•Figure: There are two target growth areas for premium cards: affluent consumers without a premium card and those with no credit card at all
•Figure: Upgraders represent the main source of growth for premium cards
•Figure: Emerging countries represent high growth for the premium card market
•Figure: The US has the largest addressable market for premium cards
•Figure: There is a high penetration of premium-branded cards among mass market customers in many countries
•Figure: Lloyd TSB and Standard Chartered in Singapore are two issuers that no longer offer gold credit cards
•Figure: Examples of the extra levels of services offered to attract mass affluent customers
•Figure: Metal cards help convey a special status
•Figure: Datamonitor's Global Credit Card Revenue Model



Companies mentioned
CMS Energy Corporation, General Mills, Inc., Hutchison 3G UK Limited, Royal Bank of Scotland Group PLC, Shanks Group plc, Sudzucker AG