CM00139-002 Affluent Premium Cards

Premium Cards
Targeting affluent consumers

Reference Code: CM00139-002 Publication Date: December 2011
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 Datamonitor. This report is a licensed product and is not to be photocopied
CM00139-002/Published 12/2011 Page 1
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+
Ultra premium
Affluent Customers Mass affluent

USD50k+
Platinum
Premium Credit Cards
Gold Mass Market
Standard
Credit Card Product
By product level
Credit Card Customers

By the size of their liquid assets
Source: Datamonitor
DATAMONITOR
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 200914, 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
Upgraders Do not want to upgrade Russia Mexico Brazil South Africa Poland Italy India Spain Singapore Australia China South Korea Germany UK Canada Netherlands Japan Sweden Hong Kong US France Global average 0% 10% 20%
New entrants Do not want a credit card
Have a premium card
30%
40%
50%
60%
70%
80%
90%
100%
Proportion of affluent customers

Source: Datamonitor's Premium Cards Opportunity Model
DATAMONITOR
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 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 1 1 1 2 2 2 2 3 3 3 4 4 4 4 4 5 5
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 5 5 6 7 7 7 8 15
Table of Contents
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 15 15 16 16 18 19 21
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 21 23 26 28 28 28 29 32 32 33 34 34 36 40 40 40 42
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 42 43
Table of Contents
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
45 46 47 48 48 48 50
51 51 53 54 54 55 55 57 57 66
Datamonitor's Global Credit Card Revenue Model analyzes card issuer revenue from three different sources66 Primary and secondary research Further reading Ask the analyst Disclaimer 67 67 68 68
Table of Contents
TABLE OF FIGURES
Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Datamonitor's definition of premium products and affluent customers Emerging countries represent high growth for the premium card market Datamonitor's definition of premium products and affluent customers The US is the largest market for affluent customers 2 6 15 17
Credit card penetration is higher among affluent customers than mass market customers 18 19 20
Figure 6: Figure 7: Figure 8: Figure 9:
60% of global affluent credit card customers have a premium credit card High inequality of wealth distribution creates demand for exclusivity
Affluent credit card customers generate more revenue per head than the mass market 22 Fee-derived income accounts for the majority of revenue from affluent credit card customers 23 25 27 28
Source of income differs substantially between countries Emerging countries are the future high growth affluent markets Affluent customers hold more credit cards than the average customer
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 37
Figure 18: Figure 19:
One in four affluent customers have used contactless payments
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 43 44 46
Upgraders represent the main source of growth for premium cards Emerging countries represent high growth for the premium card market The US has the largest addressable market for premium cards
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 52 56 66
Figure 27: Figure 28: Figure 29:
Examples of the extra levels of services offered to attract mass affluent customers Metal cards help convey a special status Datamonitor's Global Credit Card Revenue Model
Table of Contents
TABLE OF TABLES
Table 1: Table 2: Premium brands used by the main international card schemes 51
A comparison of the minimum requirement guideline for Visa Signature in different countries 53 57 58 59 60 61 62 63
Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10:
Affluent customers across different countries, 2011 Credit card penetration across different countries, by segment, 2011 Penetration of premium cards among affluent credit card customers, 2011 Annual revenue per credit card customers across different countries ($), 2011 Annual revenue per affluent credit card customers, by source of income ($), 2011 Affluent credit card customers and their primacy, 2011 Monthly credit card spend, by segment ($), 2011
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+
Ultra premium
Affluent Customers Mass affluent

USD50k+
Platinum
Premium Credit Cards
Gold Mass Market
Standard
Credit Card Product
By product level
Credit Card Customers

By the size of their liquid assets
Source: Datamonitor
DATAMONITOR
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
Affluent customers across different countries, 2011 100

Number of affluent customers
40%
90
Number of affluent customers (millions)
35% 30%
80 70 60 50 40 30 10% 20 10 0 5% 0% 25% 20% 15%
Source: Datamonitor's Global Wealth Markets Database
DATAMONITOR
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
Credit card penetration amongaffluent customers

Affluent customers Mass market customers
97% 96% 95% 95% 94% 94% 94% 92% 91% 91% 89% 89% 87% 85% 84% 84% 81% 76% 75% 74% 64%
Canada Hong Kong Japan South Korea Singapore US China Brazil Mexico UK Global average Spain France Australia Italy India Germany Sweden South Africa Russia Netherlands 0% 20% 40% 60%
80%
100%
Proportion of consumers
Note: figures in France and Germany also includes charge cards Source: Datamonitor's FSCI Survey 2011
DATAMONITOR
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
Penetration of premium cards among affluent credit card customers Singapore India Hong Kong China South Africa US South Korea Brazil Global average Mexico UK Canada Australia Spain Germany France Netherlands Japan Italy Sweden Russia 0% 20% 40%
59.5%
60%
80%
100%
Proportion of affluent credit card customers

Source: Datamonitor's FSCI Survey 2011
DATAMONITOR
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
Penetration of premium cards 100% 90%
Gini Index
Linear (Gini Index) 0.7 0.6
Penetration of premium cards
80% 70% 60% 50% 40% 30% 20% 0.1 10% 0% 0 0.3 0.2 0.5 0.4
DATAMONITOR
Gini Index

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. 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
Australia Canada Mexico Brazil China South Korea US Singapore UK Hong Kong France India South Africa Netherlands Russia Italy Japan Spain Germany Sweden $0 $100 $200 $300 $400
Affluent Mass Market
$500
$600
Annual revenue per affluent credit card customer (USD)

Source: Datamonitor's Global Credit Card Revenue Model
DATAMONITOR
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
Distribution of income by consumer segments, global average 100%
Income distribution (%)
18% 80% 60% 40% 20% 0% Affluent Mass market Consumer segments 37% 45% 21% 47% Interest income Transaction fee income Fee income
32%
DATAMONITOR
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
Fee income Australia Canada Mexico Brazil China South Korea US Singapore Global UK Hong Kong France India South Africa Netherlands Russia Italy Japan Spain Germany Sweden 0 100
Transaction fee income
Interest income
200
300
400
500
600
Revenue per affluent customers

DATAMONITOR
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 200914, whereas growth is projected at 5.7% for the developed countries.
Figure 11:
Emerging countries are the future high growth affluent markets
20% Future high growth markets 18% 16% 14%
Russia
China India
CAGR 2009-14
12% 10% 8% 6% Italy UK US France Australia
Singapore Mexico
Hong Kong Canada Spain
4% Germany 2% 0% -5% Japan
Netherlands
0%
5%
10%
15%
20%
CAGR 2005-09
DATAMONITOR
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 201014, 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 201014.
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
Number of cards per credit card customers 5

Affluent customers Overall average
Number of credit cards per person
DATAMONITOR
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
Affluent credit card customers and their card usage 100% 90% 80%
Proportion of customers
70% 60% 50% 40% 30% 20% 10%
Non-active
Multi-card
Primary card user with a back up card Primary card only
France Netherlands Italy Germany Brazil Australia UK South Africa Russia Canada Spain Global US Sweden Mexico Japan China Hong Kong India South Korea Singapore
0%
DATAMONITOR
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
"How likely are you to look for a new credit card in the next 6 months?" 60%
Affluent customers Overall customers
50% Proportion of customers
40%
30%
20%
10%
0%
DATAMONITOR
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
60%
"Before you took out your last credit card did you take any of the following actions?" Affluent customers Mass market customers
50% Proportion of customers
40%
30%
20%
10%
0% Consult with Research via Consult with Research via Research via Research via I did none of family and online news staff in the newspapers price blogs or the above friends or review branch and comparison social media sites magazines sites
DATAMONITOR

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
Monthly credit card spend comparison: Affluent vs Mass Market Customers

2,500
Average monthly spend (USD)
2,000
1,500
1,000
500
DATAMONITOR
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
100% 90%
Other Sports goods or memorabilia Fuel
Proportion of monthly spending
80% 70% 60% 50% 40% 30% 20% 10% 0%
Airline tickets and hotel reservations Mobile phone top-up Downloads of music, games, mobile apps CDs/Videos/DVDs/games Books Homewares DIY and gardening products Electrical goods Health & beauty Clothing & footwear Food & drink
Australia Brazil Canada China France Germany Hong Kong India Italy Japan Mexico Netherlands Russia Singapore South Africa South Korea Spain Sweden UK US
DATAMONITOR
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.

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:
Consumer attitudes towards contactless payments 100% 90% 80% 17% Proportion of customers 70% 60% 50% 40% 30% 20% 10% 0% Mass market customers Affluent customers 7% 25% 16% 31% 9% 20% Unaware Resistance Demand 31% Passive user Active user 17% 27%
DATAMONITOR
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
Consumer views on new payment services through mobile phones
The ability to receive offers through my mobile device based on my location
56.5% 49.3%
The ability to pay for things in shops with my mobile phone
66.2% 61.3%
0%
20%
40%
60%
80%
Proportion of consumers who are interested in the idea

DATAMONITOR
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
"I trust my credit card provider to act in my best interest" 80% 70% 60% 50% 40% 30% 20% 10% 0%
Affluent customers Overall customers
Proportion of customers who agree
DATAMONITOR
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 Datamonitor's Premium Cards Opportunity Model. 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
Source: Datamonitor
DATAMONITOR
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
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 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 premium cards
53%
Yes
89%
Have one or more credit card?
No
Do not have a premium card
but WOULD be interested in getting one and WOULD NOT be interested in getting one
2.8% 33.2%
Upgraders
36%
but WOULD be interested in getting one
1.7% 9.3%
New entrants
11%
and WOULD NOT be interested in getting one
Source: Datamonitor
DATAMONITOR
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
Upgraders Do not want to upgrade Russia Mexico Brazil South Africa Poland Italy India Spain Singapore Australia China South Korea Germany UK Canada Netherlands Japan Sweden Hong Kong US France Global average 0% 10% 20%
New entrants Do not want a credit card
Have a premium card
30%
40%
50%
60%
70%
80%
90%
100%

DATAMONITOR
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
Total opportunity (% of affluent consumers) 12 Addressable market size (number of affluent customers) 3.0
Opportunity per 100 affluent credit card customers
2.0
1.5
1.0
0.5
0.0
DATAMONITOR
Number of affluent customers (millions)
10
2.5
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 200914, 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
70% 60% 50% 40% 30% 20% 10% 0%
Proportion of mass market customers with a premium credit card
Source: Datamonitor's Financial Services Consumer Insight Survey 2011
Proportion of customers
DATAMONITOR
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
DATAMONITOR
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 Standard Gold Platinum Classic Gold Platinum
MasterCard Standard Gold Platinum
American Express Standard Gold Platinum
Premium card levels above platinum Signature Infinite* World World Elite/Signia Platinum Reserve^ Centurion*
* By invitation only ^ Only in selected countries
Source: Datamonitor, Visa, MasterCard, American Express
DATAMONITOR
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
DATAMONITOR
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* A$120,000 INR1,500,000 INR30,000
Median income*
Minimum requirement to median income ratio 2.3 5.2 0.5
Australia India Singapore
Citibank Select Visa Signature Axis Bank Signature Credit Card Standard Chartered PruPrestige Visa Signature Credit Card UOB Visa Signature Card
A$53,000 INR287,500 INR60,000
Singapore
S$50,000
S$60,000
0.8
* In local currency
Source: Datamonitor, Citibank, Axis Bank, Standard Chartered, UOB
DATAMONITOR
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, 4060% 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 timepressured 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
DATAMONITOR
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 90120 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 US Japan China South Korea Germany UK Italy France Spain Canada India Australia Russia Hong Kong Netherlands Brazil Sweden Singapore Mexico South Africa 91,401 45,486 27,001 13,801 13,162 9,262 7,963 7,555 5,285 3,705 3,679 3,017 2,147 2,141 2,036 1,788 1,317 956 816 743
Proportion of affluent customers 29.29% 35.79% 2.01% 28.17% 16.16% 14.82% 13.11% 11.93% 11.30% 10.78% 0.31% 13.35% 1.51% 30.06% 12.19% 0.91% 13.92% 18.67% 0.72% 1.49%
DATAMONITOR
Appendix
Table 4:
Credit card penetration across different countries, by segment, 2011
Affluent customers Canada Hong Kong Japan South Korea Singapore US China Brazil Mexico UK Global average Spain France Australia Italy India Germany Sweden South Africa Russia Netherlands 97.23% 95.73% 94.95% 94.64% 93.73% 93.71% 93.60% 92.34% 91.15% 90.83% 89.05% 89.01% 87.35% 84.51% 84.23% 83.58% 81.31% 76.11% 74.82% 73.57% 64.38%
Mass market customers 83.85% 76.45% 87.96% 84.46% 76.10% 74.97% 79.34% 82.03% 73.00% 68.58% 70.21% 77.20% 85.17% 69.26% 67.01% 56.95% 58.45% 62.68% 65.66% 53.20% 45.79%
DATAMONITOR
Appendix
Table 5:
Penetration of premium cards among affluent credit card customers, 2011
Percentage of premium cards Singapore India Hong Kong China South Africa US South Korea Brazil Global average Mexico UK Canada Australia Spain Germany France Netherlands Japan Italy Sweden Russia 86.92% 85.59% 81.85% 80.03% 72.12% 66.95% 63.97% 62.56% 59.51% 55.34% 53.75% 53.25% 50.56% 41.36% 37.93% 37.38% 33.98% 31.93% 31.53% 27.74% 23.30%
DATAMONITOR
Appendix
Table 6:
Annual revenue per credit card customers across different countries ($), 2011
Affluent Global Sweden Germany Spain Japan Italy Russia Netherlands South Africa India France Hong Kong UK Singapore US South Korea China Brazil Mexico Canada Australia 203.5 83.9 125.5 134.0 139.3 142.4 146.9 149.7 158.4 163.6 168.8 188.5 193.0 204.6 218.9 223.5 231.9 256.4 279.4 282.4 498.8
Mass market 150.6 80.5 96.7 134.8 82.4 123.9 125.0 83.1 104.3 87.7 127.2 128.2 178.8 172.3 169.6 146.1 138.8 185.9 248.7 189.0 386.3
DATAMONITOR
Appendix
Table 7:
Annual revenue per affluent credit card customers, by source of income ($), 2011
Fee income Sweden Germany Spain Japan Italy Russia Netherlands South Africa India France Hong Kong UK Global Singapore US South Korea China Brazil Mexico Canada Australia 36.1 73.7 71.5 63.3 64.1 84.2 57.5 40.6 50.2 135.1 104.7 24.2 74.7 118.1 23.5 25.5 170.9 67.6 66.3 54.8 146.7
Transaction fee income 26.6 36.7 11.2 74.4 17.0 6.3 80.8 58.6 24.9 6.5 58.0 97.7 92.4 71.3 127.8 186.3 54.5 29.0 64.3 169.1 191.5
Interest income 21.5 15.4 51.4 1.6 61.2 56.3 11.0 59.0 88.5 27.7 25.7 71.2 36.4 15.4 67.6 11.8 6.5 159.7 148.9 58.5 160.6
DATAMONITOR
Appendix
Table 8:
Affluent credit card customers and their primacy, 2011
Primary card only France Netherlands Italy Germany Brazil Australia UK South Africa Russia Canada Spain Global average US Sweden Mexico Japan China Hong Kong India South Korea Singapore 51.9% 49.5% 46.8% 46.0% 40.0% 39.4% 35.8% 35.6% 35.0% 34.1% 34.0% 30.3% 30.1% 29.2% 28.2% 23.5% 21.2% 18.2% 17.9% 17.0% 15.7%
Primary card user with a backup card 25.7% 22.3% 21.7% 24.1% 25.4% 36.7% 44.3% 47.1% 30.1% 48.8% 35.8% 39.1% 44.2% 40.9% 35.0% 51.8% 40.8% 40.4% 42.4% 53.8% 44.5%
Multi-card 6.1% 1.9% 6.9% 4.6% 14.5% 6.9% 7.2% 3.8% 5.8% 7.7% 15.4% 15.6% 12.8% 13.9% 19.4% 14.3% 26.5% 21.7% 27.9% 19.0% 32.6%
Non-active 16.4% 26.2% 24.6% 25.3% 20.1% 16.9% 12.7% 13.5% 29.1% 9.3% 14.8% 15.0% 13.0% 16.1% 17.5% 10.4% 11.5% 19.7% 11.8% 10.1% 7.3%
DATAMONITOR
Appendix
Table 9:
Monthly credit card spend, by segment ($), 2011
Affluent customers Australia Netherlands Canada UK US Global average South Korea Singapore Germany Hong Kong China Sweden Mexico Japan South Africa Italy France Brazil Spain India Russia 2,063 1,131 803 715 546 511 474 429 408 386 386 381 272 245 243 239 222 187 168 158 100
Mass market customers 537 162 178 118 159 158 319 197 231 141 154 118 74 112 58 136 71 96 184 48 22
DATAMONITOR
Appendix
Table 10:
Potential upgraders and new entrants to the premium card market, by country (percentage of consumers), 2011
Upgraders Russia Mexico Brazil South Africa Poland Italy India Spain Singapore Australia China South Korea Germany UK Canada Netherlands Japan Sweden Hong Kong US France Global average 8.6% 5.3% 5.3% 2.9% 2.3% 2.9% 2.9% 3.8% 2.7% 2.1% 3.8% 3.4% 0.5% 2.4% 2.8% 0.6% 2.7% 0.6% 1.8% 1.8% 1.2% 2.8%
New entrants 1.4% 3.5% 2.8% 4.3% 4.5% 3.3% 3.3% 2.2% 2.2% 2.6% 0.6% 0.4% 3.3% 0.9% 0.4% 2.5% 0.3% 2.2% 0.9% 0.8% 1.2% 1.7%
Have a premium card 17.1% 50.4% 57.8% 54.0% 36.4% 26.6% 71.5% 36.8% 81.5% 42.7% 74.9% 60.5% 30.8% 48.8% 51.8% 21.9% 30.3% 21.1% 78.4% 62.7% 32.7% 53.0%
Do not want to upgrade 47.9% 35.4% 29.3% 18.0% 31.8% 54.8% 9.1% 48.4% 9.5% 39.7% 14.9% 30.7% 50.5% 39.6% 42.7% 42.5% 62.0% 54.4% 15.5% 29.2% 53.5% 33.2%
Do not want a credit card 25.0% 5.3% 4.8% 20.9% 25.0% 12.4% 13.1% 8.8% 4.1% 12.9% 5.8% 5.0% 15.4% 8.3% 2.4% 33.1% 4.8% 21.7% 3.4% 5.5% 11.4% 9.3%
DATAMONITOR
Appendix
Table 11:
Level of opportunity and addressable market size for new premium card customers, by country, 2011
Total opportunity (percentage of affluent consumers) Russia Mexico Brazil South Africa Italy India Spain Singapore Australia China South Korea Germany UK Canada Netherlands Japan Sweden Hong Kong US France Global average 10.0 8.8 8.1 7.2 6.2 6.2 6.0 4.9 4.7 4.4 3.8 3.7 3.3 3.2 3.1 2.9 2.8 2.7 2.6 2.4 4.5
Addressable market size (number of affluent customers) 214,668 72,199 144,785 53,439 495,650 228,260 319,444 46,873 141,660 1,185,728 528,786 492,035 301,439 117,146 63,618 1,330,716 36,574 58,737 2,410,159 185,023 11,050,693
DATAMONITOR
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
Global Credit Card Revenue Model
Fee income
Transaction income
Interest income
Datamonitor Global Payment Cards Analyzer Datamonitor Financial Services Consumer Insight Survey Datamonitor Global Wealth Markets Database Secondary source data
Source: Datamonitor
DATAMONITOR
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 askfs@datamonitor.com
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.

CM00139-002 Affluent Premium Cards

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Premium Cards

Targeting affluent consumers

CM00139-002/Published 12/2011 Page 1

Assessing the attractiveness of the affluent customer segment

Datamonitor's definition of premium products and affluent customers

High net worth

Affluent Customers Mass affluent

Premium Credit Cards

Gold Mass Market

Credit Card Customers

CM00139-002/Published 12/2011 Page 2

Affluent credit card customers are crucial to issuers

Emerging countries represent the future high growth affluent markets

CM00139-002/Published 12/2011 Page 3

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

CM00139-002/Published 12/2011 Page 4

Sizing global premium card opportunities

Emerging countries represent a high growth opportunity for premium cards

CM00139-002/Published 12/2011 Page 5

New entrants Do not want a credit card

Have a premium card

Proportion of affluent customers

The US remains the largest addressable market for premium cards

CM00139-002/Published 12/2011 Page 6

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CM00139-002/Published 12/2011 Page 8

CM00139-002/Published 12/2011 Page 9

CM00139-002/Published 12/2011 Page 10

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Figure 6: Figure 7: Figure 8: Figure 9:

Figure 10: Figure 11: Figure 12: Figure 13:

Figure 18: Figure 19:

One in four affluent customers have used contactless payments

CM00139-002/Published 12/2011 Page 12

Figure 22: Figure 23: Figure 24: Figure 25:

Figure 27: Figure 28: Figure 29:

CM00139-002/Published 12/2011 Page 13

Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10:

CM00139-002/Published 12/2011 Page 14

Assessing the Attractiveness of the Affluent Customer Segment

ASSESSING THE ATTRACTIVENESS OF THE AFFLUENT CUSTOMER SEGMENT

Defining different credit card customers and credit card products

Datamonitor's definition of premium products and affluent customers

High net worth

Affluent Customers Mass affluent

Premium Credit Cards

Gold Mass Market

Credit Card Customers

CM00139-002/Published 12/2011 Page 15

Assessing the Attractiveness of the Affluent Customer Segment

CM00139-002/Published 12/2011 Page 16

Assessing the Attractiveness of the Affluent Customer Segment

The US is the largest market for affluent customers

Affluent customers across different countries, 2011 100

80 70 60 50 40 30 10% 20 10 0 5% 0% 25% 20% 15%

Source: Datamonitor's Global Wealth Markets Database

CM00139-002/Published 12/2011 Page 17

Assessing the Attractiveness of the Affluent Customer Segment

Demand for credit cards is high among affluent customers

Credit card penetration amongaffluent customers

CM00139-002/Published 12/2011 Page 18

Assessing the Attractiveness of the Affluent Customer Segment

Proportion of affluent credit card customers