Canada has seen an influx of u.s. banks rushing to issue credit card and loan products in the last 12 months – a practice that is likely to increase if the Canadian government loosens restrictions on foreign branch banking.
Under current regulations, any foreign bank wishing to operate in this country must establish a separate Canadian subsidiary, using its own capital.
If an agreement is struck on global financial services at the World Trade Organization talks later this month, foreign banks will be able to set up branches without having to establish a separate, and expensive, Canadian entity.
MasterCard International of Toronto has been one of the main beneficiaries of this new interest in the Canadian market since the u.s. banks now doing business here are issuers of MasterCard products.
These new partnerships in Canada have paid off handsomely for MasterCard, which reported a second-quarter increase of more than 10% over last year in the number of cards issued in this country.
Issuance of its corporate card products increased nearly 35% while gold cards went up 17%.
Two companies that are strictly in the business of issuing MasterCards are MBNA America of Wilmington, Del., which has opened MBNA Canada Bank in Ottawa and Capital One Financial Corporation of Falls Church, Va., which operates through Capital One of Toronto.
Both companies offer affinity and regular card products and market those products primarily through direct mail. MBNA and Capital One issue both Visa and MasterCard products in the u.s., but such duality is not allowed in Canada.
According to Bill White, president of W. White & Associates in Aurora, Ont., growth is being driven by the foreign banks’ perception of an underdeveloped MasterCard market in Canada.
White’s strategy and marketing consultancy does a lot of work in the financial services sector, as well as in packaged goods, technology and retail. He says that while MasterCard has around a 30% share of the credit card market worldwide, its share has fallen to about 23% in Canada.
