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Canadian Credit Cards - April 2011

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).

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Table of contents

  1. 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

                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                    • Bank of America Corporation
                                                                                                                                                                                                    • Bank of Nova Scotia
                                                                                                                                                                                                    • Canada Deposit Insurance Corporation (CDIC)
                                                                                                                                                                                                    • Canadian Banker’s 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)

                                                                                                                                                                                                    Canadian Credit Cards - April 2011

                                                                                                                                                                                                    £3,199.84 (Excl.Tax)