Products
BofA starts issuing MasterCard debit cards
Bank of America (BofA) has begun offering MasterCard debit cards in
the US, a switch from its long-standing Visa-only debit strategy.
The bank, the largest issuer of debit cards in the US, used its
recently announced three-year sponsorship of the National Football
League (NFL) to issue both MasterCard- and Visa-branded debit cards
with NFL team logos.
Debit card use in the US is growing at a much faster rate than
credit card use, driven in part by the increasing take-up of
contactless debit payments such as MasterCard’s PayPass.
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BofA’s NFL sponsorship deal runs through to the end of 2009. The
NFL has the largest fan base of any US sport, numbering 120
million. BofA has made sport one of its main marketing tools: it is
also the official bank of Major League Baseball and NASCAR
stock-car racing.
International expansion
Japan’s Mitsubishi UFJ considering US or European
acquisitions
Mitsubishi UFJ Financial Group (MUFG), Japan’s largest banking
group and the world’s third largest in terms of assets, is
considering buying a bank in the US or Europe to expand its
international operations.
Norimichi Kanari, deputy president of MUFG’s core banking unit,
told Reuters in an interview that the bank may buy a US or
European commercial lender in order to expand outside its core
domestic market. MUFG already has a presence in more than 40
countries, including the US through its UnionBanCal unit, the
parent of Union Bank of California.
At the end of July, MUFG announced that quarterly profits had
dropped 68 percent due to the tough Japanese consumer finance
market (see Promise buys rival to form Japan’s biggest consumer
finance firm). The banking group increased provisions at its
consumer finance arm, UFJ Nicos, against excess interest payment
claims following growing litigation against consumer finance
companies.
Corporate Social Responsibility
Shift to green banking in the US gathers pace
Four of the biggest US financial services players have each
announced environmentally friendly initiatives, an indication of
the growing integration of social responsibility into mainstream
retail banking.
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By GlobalDataGE Money has launched the Earth Rewards Platinum MasterCard, which
contributes up to 1 percent of customer purchases to buy greenhouse
gas-emissions offsets. The launch is part of the company’s
ecomagination campaign, under which GE sold $12 billion of
environmentally friendly products last year.
Citigroup’s CitiMortgage unit has rolled out the Energy Efficient
Mortgage, which allows savings from energy-efficient measures to be
added to a borrower’s qualifying income for loan approvals. In
March, the company pledged $50 billion over the next ten years to
address climate change concerns by supporting alternative energy
and clean technology solutions.
Atlanta-based SunTrust Banks has rolled out a campaign called My
Cause, a deposit- and spending-generation incentive programme for
new SunTrust and SunTrust Visa Check Card accounts. When a customer
opens one of these accounts or uses the card to make a purchase
before 15 November, the bank will donate funds to a customer’s
designated charity.
And Chase, the third-largest retail bank, has opened what it calls
its first green bank branch, constructed using environmentally
friendly building practices.
Regulation
Compliance is a rising problem for retail banks
A new report by US consultancy Aite Group concludes that compliance
demands in the US retail banking sector are rising both in
complexity and cost. This has put immense pressure on allocated
resources, pushing many banks into looking for effective, low-cost
technology-driven solutions, it says.
Due to the constant fluctuations in banking regulatory standards,
accurately meeting compliance measures is proving more difficult
than ever. Still, some 82 percent of banks surveyed believe that
compliance demands will be higher in the next three years, while
only 18 percent feel that they will remain the same. No institution
said they would drop. The report findings are based on a survey of
heads of retail banking compliance at 17 banks, including 16 of the
top 150 banks ranked by assets and one community bank.
“Creating an effective compliance programme is a highly customised
process – every bank needs to think through its unique blend of
products, processes, customers, geographies and technology to
determine where the major risks are, and how they should be
addressed,” said the author of the report, Eva Weber, an analyst
with Aite Group.
Distribution
State Bank of India looks to treble ATMs
State Bank of India (SBI), the country’s largest bank, has
announced plans to increase the number of its ATMs more than
threefold, to 25,000, over the next three years. The bank has 7,200
ATMs at present, meaning an average roll-out of more than 5,900
ATMs every year.
SBI says it is considering outsourcing options to bring down costs
and speed up the roll-out. There are at present 22,000 ATMs in
India, of which SBI has the largest share. ICICI, the country’s
largest private-sector bank, ranks second with 3,500.
SBI is the largest issuer of debit cards in the Asia-Pacific
region, the bank says, with a base of 27 million actively used
cards.
International expansion
HSBC to become first international bank to set up in rural
China
HSBC has received approval from the China Banking Regulatory
Commission (CBRC) to establish a bank in rural China. The bank will
operate through a new entity, HSBC Rural Bank Company Limited, in
one of the designated rural areas in China’s pilot programme for
rural banking.
This initiative follows the announcement by the CBRC of new
regulations to further increase market access for financial
institutions seeking to offer services in rural areas in order to
advance China’s overall development.
Stephen Green, group chairman of HSBC, said: “This presents an
excellent opportunity to connect our considerable experience in
rural finance with a wide range of models developed in a number of
our other markets including Brazil, India, Indonesia, the
Philippines and Mexico.”
Joint ventures
Banamex links with retail giant Soriana
Banamex, Mexico’s second-largest retail banking group and a
subsidiary of Citibank, has said it is forming a 50:50 joint
venture financial services operation with one of the country’s
leading retail chains, Organización Soriana, to provide a full
range of banking services to Soriana’s 25 million, largely
underbanked customers.
Soriana’s chief executive, Ricardo Martin, said the $100 million
venture will offer banking services across 240 Soriana stores by
October this year. Products that will initially be distributed
include credit cards and payroll services. The partnership will, in
due course, also offer savings products, insurance and
remittances.
In a statement, both parties said that by combining Banamex’s
established banking portfolio and Soriana’s market spread, the new
venture will aim to compete “significantly” in Mexico’s booming
financial sector.
Strategy
Rabobank may change plan for India
Rabobank is looking to divest its 19 percent stake in India’s small
but innovative Yes Bank, according to Indian newspaper Business
Standard. The bank said it would not respond to “market
rumours” when contacted by RBI.
The newspaper said the Dutch co-operative wants to start operating
in India independently but under Reserve Bank of India rules must
sell its position in Yes Bank first. Along with Yes Bank founders
Rana Kapoor and Ashok Kapur, Rabobank has a lock-in until March
2009 for its holdings with the Mumbai-based institution.
However, their stake in Yes Bank will get diluted as, according to
the newspaper, Yes Bank is planning to raise $210 million in
capital via extra equity and debt.
Strategy
Sony Bank starts online brokerage service
Sony Bank, Japan’s largest internet bank, has announced plans to
start an online brokerage service in September.
According to a report by Reuters, Sony Bank, a division of
electronics giant Sony, has been offering its customers brokerage
services through an alliance with diversified financial services
group Monex Beans. However, in a move designed to boost profits, it
is launching a stock-trading service on its own, capitalised at
¥1.5 billion ($12.7 million). This new enterprise will focus on
getting its existing 500,000 clients to trade stocks, rather than
going head-to-head with the well established online brokers for a
larger share of the market.
First-quarter 2007 financial service revenues for Sony’s financial
services segment, comprising Sony Financial Holdings, Sony Life,
Sony Assurance, Sony Bank and Sony Finance International, was
¥184.84 billion, 48.9 percent up from ¥124.10 billion a year
earlier.
Mergers and Acquisitions
Cetelem acquires Brazil’s Banco BGN
Cetelem, BNP Paribas’s consumer finance subsidiary, has extended
its presence in Brazil by acquiring 100 percent of Banco BGN, part
of the Queiroz Galvão industrial group. Banco BGN began operating
in May 1995, and specialises in low-cost credit solutions for
retirees, pensioners and government employees.
The move is a significant investment for the BNP Paribas group in
Brazil, a country in which the French bank has been operating for
50 years. Cetelem has been in Brazil since 1999, establishing
partnerships with more than 70 distributors. In terms of revenues,
the country ranks fourth for Cetelem after France, Italy and Spain,
with nearly 2 million customers.
BNP Paribas says it wants to establish a presence in all areas of
the Brazilian consumer credit market, a country it describes as
having enormous potential for growth. Brazil’s GDP has risen by 4.3
percent in the first quarter of this year, and the Brazilian
real has appreciated by 10 percent since January.
M-banking
Wells Fargo launches m-banking service
Wells Fargo, the US’s fifth-largest retail bank, has announced the
launch of Wells Fargo Mobile, a browser-based mobile banking
service. The launch of the service follows similar product
roll-outs from Citibank (see RBI 570) as well as from
Wachovia and Bank of America earlier this year (see RBI 565,
567). Of the big five US players retail banks, only JPMorgan
Chase has yet to bring an m-banking service to the market.
Jim Smith, executive vice-president and managing head of Wells
Fargo’s internet services group, said that the service was inspired
by customer feedback and the results of numerous pilot programmes.
The San Francisco-based bank, which launched an upmarket m-banking
service for business customers in May, previously piloted three
different consumer mobile services.
Using the Wells Fargo Mobile service, customers can view their
transaction history and check the account balances as well as
transfer money between eligible Wells Fargo accounts.
Strategy
CFS axes 1,000 jobs in modernisation plan
Three years after it cut 2,500 jobs in a cost-cutting drive,
Co-operative Financial Services (CFS), the ethical UK banking
group, has announced it is to cut another 1,000 back-office jobs by
the end of the year in an attempt to “improve its operational
business performance” and prepare the bank for a new era of
internet-based competition.
David Anderson, chief executive of CFS, said that the firm had been
hit hard by fierce competition from online insurers, in particular,
which had been coupled with a steady decline in branch use. The
move will save CFS some £100 million ($200 million) in annual
operating costs, the benefits of which will be shared between CFS’s
various operating entities such as Co-operative Bank and the direct
bank Smile.co.uk. Other savings will be made through the
reappraisal of supplier procurement and by simplifying business
processes throughout the company.
The move follows the integration of Co-operative Insurance and
Co-operative Bank, and will be followed by a £250 million
investment to support planned growth in areas such as general
insurance and retail banking.
Bancassurance
ING to enter ten-year deal with Piraeus Bank
ING has signed an agreement with Greece’s fourth-largest retail
bank, Piraeus Bank, for a ten-year exclusive distribution
partnership covering life, employee benefits and pension
insurances.
ING says the distribution partnership fits into its growth strategy
in Central Europe, of which extending and broadening its
distribution is one of the spearheads. The distribution partnership
will give ING exclusive access to Piraeus Bank’s network of 305
branches across Greece.
In addition, ING will acquire full ownership of ING Piraeus Life,
the joint venture between ING and Piraeus Bank. ING Piraeus Life
has grown rapidly, mainly through sales of unit-linked products,
and is currently the eighth-largest life insurer in the Greek
market with a market share of 3.7 percent.
ING also sells insurance products via tied agents through ING
Greece, and ranks fifth in the Greek life market with a market
share of 8.4 percent. Combined, ING Greece and ING Piraeus Life
become the third-largest player in the Greek life insurance
market.
MARKETING NEWS DIGEST
Segmentation
BofA aims mortgages at specific occupations
Bank of America, the US’s largest retail bank, has launched a
mortgage programme called the Neighborhood Champions Protected
Mortgage, exclusively for police officers, fire-fighters, teachers
and medical workers. The product includes an insurance benefit that
will repay all or a portion of their outstanding mortgage balance,
up to $300,000, in the event of accidental death, permanent
paralysis or dismemberment. According to US Census figures, this
product will be available to nearly 16 million people.
The targeted occupations are also eligible to receive a new rate
discount on a Bank of America home equity line of credit or home
equity loan. Other advantages of mortgage include the availability
of 100 percent financing, competitive loan rates and flexibility on
credit scores and credit histories.
Card marketing
Citibank Singapore card for low earners
Citibank Singapore has said it will offer credit cards to people
with an annual income of less than S$30,000 ($20,000), the first
bank in Singapore to do so. Central bank regulations have
previously limited credit cards to those earning more than
S$30,000.
The updated rules now allow card issuers to grant S$500 in
unsecured credit to the previously uncarded market.
With the new Citi Clear Card, Citibank plans to target young adults
aged 18 to 35 – a group that makes up around one-half of the
potential customers earning below S$30,000 per annum. The bank will
offer a 28 percent interest rate on the card, compared with 24
percent on its other cards. Citi hopes that it will bring access to
a large number of young and upwardly mobile consumers.
Sports sponsorship
Royal Bank of Scotland announces sponsorship of golf’s PGA of
America
Royal Bank of Scotland (RBS) has made a substantial investment in
golf sponsorship by becoming the first official patron of the
Professional Golf Association (PGA) of America. This is the highest
level of partnership and designation yet granted by the world’s
largest working sports organisation.
RBS designations from 2007 to 2009 in the PGA official patron
programme will include Official Patron of the PGA of America,
Official Patron of the PGA Championship, Official Bank of the PGA
of America, Official Bank of the PGA Championship and Proud
Supporter of the 2008 Ryder Cup.
RBS is already heavily involved in golf. In addition to its
100-year affiliation with the Royal & Ancient Golf Club of St
Andrews in Scotland and as a patron of the UK’s Open Championship,
RBS includes famous golf players Jack Nicklaus, Luke Donald and
Paula Creamer as brand ambassadors.
Cards marketing
ICICI launches Visa Signature credit card
ICICI, India’s largest private-sector banking group, has launched
what it describes as the first premium credit card in India, the
ICICI Bank Visa Signature credit card. The card will be offered
only to a small number of customers; according to Sachin
Khandelwal, head of credit cards at ICICI Bank, the bank has
planned very limited promotional marketing campaigns to retain
“product exclusivity”.
Sales of the Visa Signature card will be largely through invitation
of existing premium cardholders. ICICI currently has only 200,000
platinum cards, against a base of approximately 8.5 million credit
cards.
Benefits of the card package include access to exclusive events,
restaurant reservations, travel upgrades and offerings and
comprehensive air travel insurance, accompanied by a new rewards
programme that offers five reward points for every INR100 ($2.43)
spent.
Segmentation
WaMu targets youth with music and sports
Washington Mutual (WaMu), the US’s largest thrift, has launched a
new programme targeting a younger market segment via a range of
music, sports and cultural events. Branded WaMu Live!, the
programme offers customers special benefits such as free parking
and access to concession stands at a range of WaMu-branded
venues.
The scheme includes classical music concerts, events such as Cirque
du Soleil and sporting events. WaMu is promoting the campaign via
in-store signage and at the website wamulive.com, which has events
listed, sweepstakes and a Tell Your Entourage viral marketing
component.
The bank says the inspiration for the campaign was its acquisition
of naming rights to theatres in Seattle, Los Angeles and New
York.
Segmentation
BBVA rolls out savings campaign for the very young market
segment
BBVA, Spain’s second-largest retail bank, has again tightened its
focus on the Spanish youth market, this time launching the Miniblue
Panini account, aimed at young children. Campaign initiatives will
include sponsoring 270 million Spanish football league trading
cards and 3.5 million football sticker albums.
The move is part of the bank’s BBVABlue campaign, launched in
October last year and added to in February this year, which offers
both financial and non-financial products and services tailored to
the particular needs of young people. BBVA has segmented its
offering for three groups: Miniblue, targeting children aged up to
13; Blue for customers aged between 14 and 20; and MasBlue for the
21 to 29 age group (see RBI 566).
New Miniblue account customers will receive 3 percent interest on
their savings, as well as 300 trading cards and the football league
album as free gifts. Existing customers can also take advantage of
the promotion by depositing €300 ($406) in their Miniblue
account.
The campaign is aimed at trading card collecting, which is a
favourite hobby among children and even some adults in Spain.
The Spanish banking giant says it has so far attracted 200,000
young customers out of its target 500,000 with its BBVABlue
programme during the past seven months. It has also increased
revenues via mortgages for young adults by 73 percent, reaching a
total of €2.5 billion.
Marketing campaigns
OCBC creates two new ‘superhero’ savers to help boost child
savings
Singapore’s OCBC Bank has created two ‘superhero’ characters, Simon
and Sally Saves, to launch its new OCBC Mighty Savers Schools
programme, a national campaign aimed at getting children to save
more. The OCBC Mighty Savers programme was introduced in February
this year and to date has attracted over 20,000 children, according
to the bank.
“OCBC Mighty Savers Simon and Sally [approach] children at their
level and get them involved in various activities that will excite
the children about saving. This creates an enriching and effective
money management learning process,” said Nicholas Tan, head of
group wealth management at OCBC Bank.
One of the key components of the savings programme is the OCBC
Mighty Savers Stickers and Card, which rewards children who reach
significant milestones in saving.
