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- The Canadian Credit Card Market - April 2011
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Terms
The following terms are also used in the report.
- Bank of Canada: Canada’s central bank is responsible for Canadian monetary policy, issuing bank notes, regulating and supporting Canada’s principal systems for clearing and settling payments, and acting as fiscal agent for federal government debt.
- Bankruptcy: In Canada, a full liquidation of a person’s debts, equivalent to a Chapter 7 personal bankruptcy filing in the U.S.
- Canada Deposit Insurance Corporation (CDIC): A federal Crown Corporation established in 1967 to protect Canadian currency deposits against the possible failure of CDIC member financial institutions. As a general rule, eligible deposits are protected up to a maximum of C$100,000 per person, including principal and interest, at each member institution.
- Disposable income: The amount of income left to an individual after taxes have been paid, available for spending and saving.
- Duality: The ability of a bank to issue both Visa and MasterCard cards concurrently, not just one or the other.
- Federally regulated financial institution: In general, federally incorporated companies—regulated by the Office of the Superintendent of Financial Institutions (OSFI)—that take deposits, or provide trust and loan services, life insurance, or property and casualty insurance.
- Interac Association: A nonprofit, member-owned association that controls the Canadian debit payments system.
- Office of the Superintendent of Financial Institutions (OSFI): A federal agency established under the Financial Institutions and Deposit Insurance System Amendment Act to supervise all federally regulated financial institutions. These include all banks, all federally incorporated or registered insurance, trust, and loan companies, cooperative credit associations, and fraternal benefit societies. OSFI is also responsible for monitoring federally regulated pension plans.
- Proposal: An insolvency petition involving a debt repayment plan, similar to a U.S. Chapter 13 filing.
- Schedule I bank: A federally regulated Canadian bank.
- Schedule II bank: A federally regulated foreign bank.
- Schedule III bank: A federally regulated foreign bank branch (lending and full service).
Scope and Themes
What you need to know
Data sources
Consumer survey data
VMS
Abbreviations and terms
Abbreviations
Terms
Companies mentioned in this report
Executive Summary
Industry overview
Innovation and innovators
Marketing strategies
The Canadian credit card consumer
Asians are a growing and attractive demographic
Insights and Opportunities
Key points
MasterCard issuers would like to entice customers to use their cards more
What’s going on here?
Cash rewards cards need to be revamped to boost appeal
Co-branding can boost card appeal, ease tensions with merchants
Inspire Insights
Trend: Non-standard Society
What’s it about?
What we’ve seen
Specifics
Implications
Market Size and Forecast
Key points
Canadian card market totals C$309 billion in charge volume
Figure 1: Card Volume at Canadian Visa and MasterCard Issuers, 2000-10
Figure 2: Canadian credit card banks, ranked by outstandings, 2009 and 2010
Competitive Context
Key points
Card industry battles new regulations, price actions
Code of Conduct takes effect
Competition Bureau sues Visa, MasterCard over prohibition on surcharging
Deloitte Canada: Use the current crisis to innovate
Banks may have an edge over monoline issuers
Segment Performance
Key points
MasterCard is poised to narrow the gap with Visa
Figure 3: Visa vs. MasterCard in Canada, 2009-10
Most big Canadian issuers favor Visa—for now
Figure 4: Canadian credit card banks, by brand, 2009-10
More Canadian banks issue MasterCards
Market Drivers
Key points
Canadian consumer debt levels grow to historic proportions
Canadian household debt-to-income ratio tops the U.S.
Figure 5: 90-day credit card delinquencies at Visa/MasterCard issuers, 2000-10
Canadian consumer bankruptcy rate also beats the U.S.
The Bank of Canada is worried
Figure 7: Canadian unemployment rate, January 2008-January 2011
Leading Companies
Key points
Figure 8: Fee income at Canadian credit card banks, 2008-10
CIBC (Canadian Imperial Bank of Commerce)
Bank of Nova Scotia (Scotiabank)
Royal Bank of Canada (RBC)
TD Bank (Toronto-Dominion)
Bank of Montreal (BMO)
MBNA Canada Bank
Desjardins Group (Fédération des Caisses Desjardins du Québec)
Canadian Tire Financial Services
Capital One Bank Canada
President’s Choice Financial (PC)
Citigroup
American Express
Discover
HSBC Bank Canada
Innovation and Innovators
Key points
Walmart Canada enters card market with rewards MasterCard
RBC is first big Visa issuer to offer MasterCard-branded cards
CIBC, Canada’s largest Visa issuer, launches three MasterCard products
BMO affinity card targets “new-to-Canada” Chinese
Capital One Canada partners with Delta Air Lines
Mobile phone app lets consumers create virtual wallets
American Express revamps Costco rewards card
Marketing Strategies
Key points
Overview
Notable direct mail, print, and email advertising
Delta SkyMiles World MasterCard from Capital One
Figure 9: Delta SkyMiles direct mail ad, November 2010
Aspire Gold MasterCard from Capital One
Figure 10: Capital One direct mail ad, December 2010
Cash Advantage MasterCard from Canadian Tire
Figure 11: Canadian Tire direct mail ad, December 2010
Equal Payment Plan financing from Canadian Tire
Figure 12: Canadian Tire direct mail ad, December 2010
Special Offer from President's Choice Financial
Figure 13: President’s choice Financial direct mail ad, August 2010
BMO Club Sobeys MasterCard from Bank of Montreal
Figure 14: Bank of Montreal direct mail ad, November 2010
More Rewards MasterCard from MBNA Canada
Figure 15: MBNA direct mail ad, May 2010
MBNA Smart Cash Platinum Plus MasterCard from Bank of America
Figure 16: MBNA direct mail ad, June 2010
Shoppers Optimum MasterCard from Bank of America
Figure 17: Bank of America direct mail ad, October 2010
Scotia Momentum Visa card from Scotiabank
Figure 18: Scotiabank direct mail ad, December 2010
TrueEarnings Card from American Express (Costco)
Figure 19: American Express/Costco direct mail ad, December 2010
WestJet RBC World MasterCard from RBC
Figure 20: RBC direct mail ad, June 2010
RBC Visa Cash Back card from RBC
Figure 21: RBC direct mail ad, July 2010
The Consumer
Key points
Cards with points are the biggest influence on new card choice
Figure 22: Main reason for choosing a credit card, by gender, December 2010
Building credit is important to young people, those with less income
Figure 23: Main reason for choosing a credit card, by age, December 2010
Figure 24: Main reason for choosing a credit card, by income, December 2010
Card choice varies by province
Figure 25: Main reason for choosing a credit card, by census region, December 2010
Figure 26: Main reason for choosing a credit card, by language, December 2010
Points cards are most popular, non-rewards cards rank second
Figure 27: Types of credit card owned, by gender, December 2010
Card rewards and age
Figure 28: Types of credit card owned, by age, December 2010
Increasing use of rewards cards correlates with higher income
Figure 29: Types of credit card owned, by income, December 2010
Figure 30: Types of credit card owned, by income, December 2010
Quebecois are least interested in earning miles
Figure 31: Types of credit card owned, by language, December 2010
Consumers favor rewards over low rates by two to one
Figure 32: Reasons for using credit card, by gender, December 2010
Those with highest incomes are most interested in rewards
Figure 33: Reasons for using credit card, by income, December 2010
Card preference varies by province
Figure 34: Reasons for using credit card, by census region, December 2010
Figure 35: Reasons for using credit card, by language, December 2010
Most cardholders say they pay their balances in full each month
Figure 36: Credit card payment activity, by gender, December 2010
Payment behavior and age
Figure 37: Credit card payment activity, by age, December 2010
Payment behavior and income
Figure 38: Credit card payment activity, by income, December 2010
Payment behavior varies by where people live
Figure 39: Credit card payment activity, by census region, December 2010
Credit is preferred over debit
Figure 40: Preferred payment method for purchases, by gender, December 2010
Age and income correlate with preference for credit cards
Figure 41: Preferred payment method for purchases, by age, December 2010
Figure 42: Preferred payment method for purchases, by income, December 2010
Quebecois less likely to favor credit compared to other provinces
Figure 43: Preferred payment method for purchases, by census region, December 2010
Most credit card users stick to one card
Figure 44: Number of credit cards used monthly, by gender, December 2010
Card use and age
Figure 45: Number of credit cards used monthly, by age, December 2010
High income correlates with more cards
Figure 46: Number of credit cards used monthly, by income, December 2010
Card use varies sharply by province
Figure 47: Number of credit cards used monthly, by census region, December 2010
Card use varies by type and size of purchase
Figure 48: Purchase categories for credit card use, by gender, December 2010
Figure 49: Purchase categories for credit card use, by age, December 2010
Figure 50: Purchase categories for credit card use, by income, December 2010
Figure 51: Purchase size categories for credit card use, by gender, December 2010
Figure 52: Purchase size categories for credit card use, by age, December 2010
Figure 53: Purchase size categories for credit card use, by income, December 2010
Canadians not tied to primary bank for credit cards
Figure 54: Primary credit card is issued by company other than primary bank, by gender, December 2010
Figure 55: Primary credit card is issued by company other than primary bank, by age, December 2010
Figure 56: Primary credit card is issued by company other than primary bank, by income, December 2010
Quebecois more likely to get cards from primary bank
Figure 57: Primary credit card is issued by company other than primary bank, by census region, December 2010
Figure 58: Primary credit card is issued by company other than primary bank, by language, December 2010
Some 12% say they use mobile channel for card activity
Figure 59: Conducted credit card business through mobile banking, by gender, December 2010
Mobile banking use inversely correlated with age
Figure 60: Have conducted activities associated with credit card using mobile channel, by age, December 2010
Higher-income people more likely to use mobile banking
Figure 61: Have conducted activities associated with credit card using mobile channel, by income, December 2010
Quebecois are least likely to use mobile channel
Figure 62: Have conducted activities associated with credit card using mobile channel, December 2010
Figure 63: Have conducted activities associated with credit card using mobile channel, December 2010
Visa has a slight edge over MasterCard—at least in our survey
Figure 64: Credit card type used most frequently, by gender, December 2010
Figure 65: Credit card type used most frequently, by age, December 2010
Figure 66: Credit card type used most frequently, by income, December 2010
Card duality hasn’t reached most consumers
Figure 67: Have or have not been offered a different credit card brand, by gender, December 2010
Youngest group is most interested in getting new card brand
Figure 68: Have or have not been offered a different credit card brand, by age, December 2010
Consumer attitudes toward credit card advertising
Figure 69: Attitudes about credit card advertising, by gender, December 2010
Youngest consumers read card mail, oldest group doesn’t
Figure 70: Attitudes about credit card advertising, by age, December 2010
Figure 71: Attitudes about credit card advertising, by income, December 2010
Respondents say mail volume is down
Figure 73: Credit card acquisition mail received compared to six months earlier, by gender, December 2010
Responses indicate card issuers are targeting young people
Figure 74: Credit card acquisition mail received compared to six months earlier, by age, December 2010
Lower-income people are getting less mail
Figure 75: Credit card acquisition mail received compared to six months earlier, by income, December 2010
Cluster Analysis
Interesteds
Demographics
Characteristics
Opportunity
Reluctants
Demographics
Characteristics
Opportunity
Rewarders
Demographics
Characteristics
Opportunity
Cluster characteristics
Figure 77: Canadian credit card clusters, January 2011
Figure 78: Credit card usage behavior, by Canadian credit card clusters, January 2011
Figure 79: Behavior toward credit card advertising, by Canadian credit card clusters, January 2011
Figure 80: Reason for choosing credit card, by Canadian credit card clusters, January 2011
Figure 81: Credit card preferences, by Canadian credit card clusters, January 2011
Cluster demographics
Figure 82: Canadian credit card clusters, by gender, January 2011
Figure 83: Canadian credit card clusters, by age group, January 2011
Figure 84: Canadian credit card clusters, by household income, January 2011
Figure 85: Canadian credit card clusters, by race, January 2011
Cluster methodology
Custom Consumer Groups: Asians
Key points
Asians are a highly attractive—and growing—consumer group
Asians much prefer credit over debit
Figure 86: Preferred payment method, by race, December 2010
Asians carry many more credit cards than other Canadians
Figure 87: Number of credit cards used monthly, by race, December 2010
Asians use credit for just about all types of purchases
Figure 88: Purchase categories for credit card use, by race, December 2010
Figure 89: Purchase categories by dollar amount for credit card use, by race, December 2010
Asians love their rewards cards
Figure 90: Types of credit card owned, by race, December 2010
Asians more likely to use a credit card for business purposes
Figure 91: Reasons for using credit card, by race, December 2010
Asians pay their card bill in full each month
Figure 92: Credit card payment activity, by race, December 2010
Asians eager to apply for other brands of credit cards
Figure 93: Offered a different credit card brand, by gender, December 2010
Asians well ahead of others in using the mobile channel
Figure 94: Have used mobile phone to conduct credit card related activities, by race, December 2010
Asians want rewards, not lower rates
Figure 95: Primary reasons for choosing a credit card, by race, December 2010
Asians pay attention to credit card mail, advertising
Figure 96: Attitudes toward credit card advertising, by race, December 2010
Card issuers are increasingly soliciting Asians
Figure 97: Amount of credit card mail received as compared to six months previous, by race, December 2010
Appendix—Trade Associations
- Bank of America Corporation
- Bank of Nova Scotia
- Canada Deposit Insurance Corporation (CDIC)
- Canadian Bankers Association (CBA)
- Canadian Imperial Bank of Commerce
- Canadian Payments Association (CPA)
- Canadian Tire Corporation, Limited
- Delta Air Lines, Inc.
- Hudson's Bay Company
- Interac Association
- Loblaw Companies
- National Bank of Canada
- Royal Bank of Canada
- Sobeys
- Walmart Stores (USA)
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