Payments reform has been sweeping across the globe. In many of the top payments markets, reform has either been implemented recently or is on the table for discussion. Governments such as the U.S., the U.K., Canada, Japan, Australia, South Africa and more, are placing restrictions on lending like never before.

Australia is the latest market to come under the spotlight. With a large economy and an advanced payments infrastructure, Australia is known for being a leader when it comes to regulatory reform in the payments industry. The impact of the Reserve Bank of Australia’s (RBA) regulation of debit and credit card interchange fees, in 2003, was frequently referenced in discussions here in the United States regarding debit card regulation. In fact, the initial proposal by the Federal Reserve, under the Durbin Amendment, was for 12 cents per debit transaction, as it is in Australia. (After overwhelming criticism this was increased to an average of 24 cents per transaction, according to Federal Reserve estimates).

In 2009, the Australian parliament passed new laws to further regulate its payments industry with many of them due to be implemented in July, 2012. The legislation is reminiscent of the CARD Act, passed by congress and signed into law by President Obama in May, 2009, as well as credit card reform introduced in Canada in early 2010. Card marketers in the U.S. and Canada will therefore find the following list of highlights reassuringly familiar:

• Payments must be allocated to highest interest rate balances first. (Introduced in the US and Canada.)
• Consumers must consent (opt-in) to overlimit fees. (Introduced in the US and Canada.)
• Consumers are allowed to go over-the-limit by 10% of their credit line without incurring a fee. (Australia only.)
• Consumers must provide their consent prior to having their credit limits raised. (Canada only.)
• Offers for credit should contain a box that outlines the terms, including rates and fees, in clear and concise language. (Introduced/improved in the US and Canada.)
• Issuers must provide a statement warning customers how long it will take to pay down a balance if they only pay the minimum amount due each month. (Introduced in the US and Canada).

Clearly, regulators are learning from reform around the globe by taking the most impactful regulations and adapting them to local markets. Marketers should take heed of the fact that not only are regulators learning from what is happening in other countries; but, they are also, to varying degrees, working together on committees and sub-committees which makes the global trade of payments regulation even more likely.

It therefore makes sense for payments marketers to learn from what is going on in other countries and adapt those ideas for local consumption. The changes to interchange in Australia caused Australian card marketers to cut perks and shrink rewards programs. Similarly, in the U.S., the Durbin Amendment has prompted the banks to charge fees for checking accounts and to scale back on debit rewards. The roles have now been reversed and Australian issuers are able to learn from how U.S. and Canadian card issuers responded to product and pricing regulations. In fact I just returned from a tour of Australia and New Zealand where I was asked to give a series of speeches on this very topic – “Card Marketers Response to Regulations,” with a focus on the U.S. and Canada.

The regulators are working together and learning from each other making the global trade of payments reform inevitable. Those marketers that keep an eye on how issuers are responding in other markets, whether here in the U.S., Australia or elsewhere, will gain a competitive advantage.

Seeing potential in Canadian market, American Express’s marketing campaigns evolve and integrate

In October, American Express launched a multi-million dollar “Realize the Potential” campaign in Canada. This move is significant as it represents the first major brand advertising from American Express in Canada in almost a year. Developed by OgilvyOne Worldwide, the advertising campaign promised an integrated effort across multiple marketing channels.

Initial print advertisements were captured by Mintel Comperemedia in October. Running through February of this year, the ads take a playful tone to appeal to a younger demographic than is traditionally associated with American Express. Print ads in The Globe and Mail use color on a black background for impact and cleverly spell out the name “Daniel” in numbers. The ad states that “we see you as a person, not a number.” A link is provided for more information about the campaign: www.americanexpress.ca/potential.

Now in 2010, we’re seeing new print advertising. An ad in the National Post simply states “Be a traveler, not a tourist,” as American Express demonstrates that it is more than just a payments card. To create additional impact, ads have also been published in non-traditional shapes and sizes. One seen in February in the Toronto Star is L-shaped and playfully states “Come fly with me…or me! or me!” to demonstrate the flexibility of the Membership Rewards Program given that you can use rewards to fly on any airline.

The print advertisements and digital campaign are now being integrated with direct mail. In February, direct mail offers for the American Express Platinum Card included the “Realize the Potential” tagline, while statement mailings took the same blithe tone as the print advertisements to describe how easy it is to turn points into rewards.

Just last week American Express announced a new Canadian campaign to promote card acceptance at popular merchants such as fast food outlets and drug stores. Combined with an increase in mail volume, these efforts show that American Express is clearly committed to investment in the Canadian credit card market.

Thank you to all who viewed my webinar on Canadian Credit Card Direct Marketing Opportunities yesterday! I enjoyed the chance to share insights from the Mintel Comperemedia database, and I hope you found the information useful and informative.

If you missed the webinar, you can view the slides or a recording here.

We received a some good questions from attendees, which I’ve answered below. If you think of any more questions, please use the comments field to ask them and I’ll respond on this blog. Alternatively, you can email questions to your account manager or ask our PR department (press@mintel.com).

My question is regarding Andrew’s view of charge card market in Canada: what is the perception of charge cards?

From a direct mail perspective, charge cards are very much a niche product in Canada. They’re offered only by American Express. In Q4 2009, just 3% of estimated acquisition direct mail volume was for charge cards. This could change in the future. Back in October, American Express launched its “Realize the potential” campaign to promote its brand and charge card products which are high-end and aspirational. We have seen print advertising and now we are starting to see more integrated campaigns in the mail.

Do you expect mail volume in Canada to return to pre-recession levels? When?

Yes. The US overextended itself on many fronts including credit card acquisition direct mail and it is likely to rebound but not to go back to previous volume levels. In Canada, the situation has been more stable. The Canadian banks remain strong and MBNA and Capital One are expanding their activities in the US. American Express is investing in its brand. I anticipate an increase in 2010 with a return to annual mail volumes above 250 million in 2011.

Is there an impact on direct mail response rates due to emergence of online as an acquisition channel?

Canadians have been acquiring cards online or at the branch for years. US issuers such as MBNA and Capital One still rely on direct mail for their new customers. The key is driving customers to the website, and direct mail is an essential tool in any “drive to web” credit card strategy.

Andrew didn’t comment on Citicards in his presentation. Are they not a dominant player or force in mass acquisition anymore?

We currently see very little direct mail from Citi in Canada. The bank issues the Citi Petro-Points MasterCard and the Citi Drivers Edge MasterCard. It also has the license for Diners Club and manages a large private label portfolio including Staples, Zales and The Home Depot. Citi’s mail volume in the US has also declined significantly in recent months.

What else can be targeted to immigrants besides credit-building cards?

Card issuers can bring the credit-building message into their marketing, even if they’re promoting a rewards card. The CPAC card for Chinese professionals recently launched by the Bank of Montreal is a classic example. Once you’ve captured a customer, you have a great opportunity to build loyalty and cross-sell other products and services.

How many people use debit instead of credit cards in Canada?

In 2008, Interac handled roughly twice as many transactions as Visa and MasterCard combined, proving that Canadians clearly have a preference for debit. However, the recent trend has been towards credit as Canadians prefer to use credit cards for large purchases. The new rules allowing duality are opening up the debit card market for Visa and MasterCard, so we may see increased debit usage as these associations begin to promote their debit platforms.

Who are the top US credit card issuers that threaten the Canadian market in terms of direct mail?

MBNA is the biggest threat to established Canadian banks because it is the top mailer and is also the largest and fastest growing among MasterCard issuers. Capital One is also a threat due to its focus on credit-building and the growing immigrant population. Additionally, American Express has clearly stated its commitment to the Canadian market by investing in new marketing campaigns and increasing its mail volumes.

We’ve got a webinar coming up this Thursday and it covers a region not always included in Mintel Comperemedia analysis: Canada. We track direct mail and print advertising across Canada, so I’m glad we’ll be able to share insights into the Canadian credit card direct marketing scene. You can sign up for the webinar by clicking HERE.

It’s free (always good in this down economy) and begins promptly at 2:00pm CT. The webinar will last 45 minutes, followed by 15 minutes of Q&A. We’ll post all the questions and answers here after the webinar, so be sure to check back.

More detail about the content:
The landscape for Canadian credit card marketing has changed dramatically over the past two years. As the Canadian economy begins to improve, credit card issuers are now faced with adapting to new government regulations that are re-shaping the industry, while also positioning themselves to take advantage of a potential recovery. This unique situation creates multiple opportunities for credit card marketers as they look to the future and work towards increasing their effectiveness.

Please join Andrew Davidson, Senior Vice President at Mintel Comperemedia, as he discusses the challenges facing Canadian credit card marketers and outlines five areas of opportunity for the future.

In this webinar Andrew Davidson will discuss the following questions:

- How can the present state of direct marketing be advantageous for credit card marketers?
- What opportunities are emerging as a result of the changing landscape?
- What can credit card marketers do to leverage the benefits from new government regulations?
- How can card issuers win in an increasingly competitive environment?