A major shake-up in the U.S. credit card market has caught the attention of Canadian credit card issuers and may lead to changes in how banks here brand the credit cards they issue
Citigroup, the parent company of Citibank, and one of the largest issuers of credit cards in the U.S., is planning to pull much of its credit card business from Visa in favour of rival MasterCard, reportedly in order to have more control over its brand.
New York-based Citigroup is believed to have been frustrated by Visa’s brand building efforts, which, in addition to promoting the Visa brand, ends up helping the hundreds of smaller Visa-issuing banks that compete with Citibank across the U.S.
Citigroup has been attempting to gain greater control of its credit card brand for years, says Charles Stuart, a banking analyst at Ernst & Young in Toronto and former general manager of Citibank’s Canadian operations. In the U.S., he says, Citibank’s marketing has always emphasized its own brand over the competing Visa credit cards with such lines as ‘Not just Visa… Citibank Visa.’
The domination of Canadian banking by a small group of large banks makes a similar shake up in Canada unlikely in the near future, Stuart says.
However, bankers are watching closely to see what concessions Citigroup is able to negotiate from MasterCard, he says, as some bankers would prefer to have total control of the credit card brand and reduce the role of the credit card companies to mere transaction processor.
‘We could see a situation like Interac,’ he says. ‘We could see a card with the bank logo predominant on the front and only a tiny Visa or MasterCard logo on the back.’
However, Bill White, president of Aurora, Ont.-based W. White and Associates, an independent credit card marketing consultancy, says that while Citibank has a massive global presence, Canadian banks still need the global recognition of Visa and MasterCard.
Canada’s large banks all benefit equally from the marketing done by the credit card companies, he says.
‘Credit card brands are very important to the banks,’ says White. ‘Everyone in Canada and the world knows the Visa and MasterCard brand. If you go to Timbuktu people may not know the Toronto Dominion bank, but they will know TD Visa.
‘The Canadian banks aren’t really feeling the pinch of banks like Citibank,’ he continues. ‘The spending is pretty proportional to their size, and they all benefit from the value of the major credit card brands.’
Credit card marketing is carefully constructed to ensure that it helps each of the member associations, says Gary Hetherington, senior vice-president and general manager of MasterCard’s Canadian operation.
‘Our marketing is always a collaborative effort between us and our member organizations,’ he says.
Visa’s Canadian marketing program emphasizes its global acceptability and recognition, says Rick Pyves, Visa Canada’s vice-president of marketing.
‘Our role is to show strength in the Visa brand,’ he says. ‘We work hard not to do anything that will compromise the ability of any of our members to compete.’
Credit cards are one of the most visible points of differentiation between the banks. However, rather than emphasize their own unique bank brands, Canadian banks have followed the strategy of marketing their cards through alliances with other well-known brands, says Walt Macnee, senior vice-president of Toronto Dominion Visa in Toronto.
The TD Bank launched two such Visa cards with Harley Davidson and U.S.-retail giant Wal-Mart in October. The Royal Bank has co-branded its Visa card with Canadian Airlines, CIBC with Zellers and the Bank of Montreal has shared the branding of its MasterCard with everything from AirMiles to Star Trek.
‘The credit cards are differentiated in Canada through our unique features, pricing and affinity or loyalty programs,’ says Macnee, adding that he cannot see Canadian banks moving to de-emphasize the Visa or MasterCard brand on their credit cards anytime in the near future.
‘The credit card brand is still very important for [our customers],’ he says.
Sue Harnett, president of Citibank Canada, says the bank’s growing ability to control the credit card brand will improve its chances of asserting its own brand with its customers.
Meanwhile, she says, there are no immediate plans to change any of the Citibank Visa cards issued in Canada. Citibank controls about 2.5% of the Canadian credit card market and launched its Driver’s Edge Visa card in January as part of its ongoing strategy of using credit cards to attract customers to its small retail operations in Canada.
