Australian Credit Card Consumers 2010

Introduction
The Australian credit card landscape has undergone significant changes in the last few years, primarily driven by a shift in consumer demands and the recent global financial crisis. The recent changes may provide both opportunities and threats to Australian credit card industry and it is critical to understand their behavior to gain benefits from a specific consumer segment.

Features and benefits
Use these insights into the behaviour of Australian credit card cutsomers across four product lifecycles to shape your acquisition strategy
Identify new opportunities by uncovering different consumer attitudes towards credit cards across four consumer profiles
Achieve a high customer retention rate by understanding key switching factors for credit card consumers
Formulate strategies to attract specific consumer segments by uncovering the opportunities available across different consumer segments
Highlights
In the context of Australian FS providers, the importance of a segmented-strategy approach is becoming apparent, allowing issuers to identify and target the most attractive segments to achieve their goals as competition in credit card sector intensifies.

Datamonitor's research shows that younger generations and frequent card users are more likely to switch cards than others. Overall, 3.35% of consumers have switched their credit cards in the last 12 months, an indication of poor customer experience. By understanding the key drivers on switching, FS providers can form efficient retention strategies.

In 2010, consumers have made a greater effort to repay their credit card debt in full, with 48.43% of consumers indicated that they are doing so every month. If this trend continues, this may means a threat to the current revenue model and thus the profitability of Australian credit card portfolio in the long term.

Your key questions answered
Which consumer segments may give the biggest threats and opportunities for credit card issuers in Australia?
How important are different credit card features to attract a specific card usage profile?
How can credit card issuers address some problems identified by consumers in applying over the internet?
Why consumers have changed the way they use their credit cards and the implications for current revenue models.

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TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Datamonitor defines four Australian credit card profiles 2
Understanding consumer behavior across the four stages of the product cycle 2
Strategies to attract Australian credit card consumers 4
Australian Credit Card Consumer Segments 11
Datamonitor has defined four Australian credit card profiles 11
Consumer Insight: The Four Stages of the Product Lifecycle 14
Research: consumers seek independent opinions and value propositions 15
Apply: FS providers need to acknowledge the importance of online distribution 19
Use: a shift in card usage signifies future opportunities for innovation 23
Switch: younger generations provide both opportunities and threats to future businesses 30
Strategies to attract Australian credit card consumers 32
A personalized service may reduce the barriers to online credit card applications 32
FS providers need to understand credit card users' various switching triggers 34
Appendix 38
Supplementary data 38
Methodology 51
Further reading 51
Ask the analyst 51
Datamonitor consulting 51
Disclaimer 51


TABLE OF FIGURES
Figure 1: FS providers need to understand the issues and demands of the online channel 3
Figure 2: Different pricing strategies will attract specific credit card users 5
Figure 3: Consumer demand has driven credit card product evolution, 2004–10 11
Figure 4: Datamonitor credit card profiles 12
Figure 5: The four stages of the product lifecycle 14
Figure 6: Word of mouth is the number one source of information when choosing a credit card provider 15
Figure 7: Consumers are looking for a balance between fees, rewards, and interest rates 17
Figure 8: An existing relationship is the key reason for consumers to choose their credit card provider 18
Figure 9: Branches are still the main channel to apply for credit cards 19
Figure 10: Online applications gained in popularity among Australian credit card consumers 20
Figure 11: FS providers need to understand the issues and demands of the online channel 21
Figure 12: The lack of personalized services is one of the main barriers to applying online 22
Figure 13: Consumers have consolidated their credit card accounts over the past two years 23
Figure 14: More consumers are repaying their credit card debt in full in 2010 than in 2008 24
Figure 15: Consumers prefer to use a debit card for small purchases 25
Figure 16: Consumers gave mixed responses regarding contactless payments 27
Figure 17: Older Australian consumers are the most reluctant to make payments without signing or entering a PIN 28
Figure 18: Demand for cash-related rewards is high 29
Figure 19: Younger generations and frequent card users are more likely to switch cards than others 30
Figure 20: Consumers are looking for product value 31
Figure 21: Online chat facilities provide personalized help for online users 33
Figure 22: Each product element is valued differently by different card users 34
Figure 23: Revolvers and low income consumers want a higher credit limit 36


TABLE OF TABLES
Table 1: Interest rate margins, 2004–07 38
Table 2: Interest rate margins, 2007–10 39
Table 3: Responses to the question "What sources of information did you use when choosing your provider of main credit card?", by credit card user profile 40
Table 4: Responses to the question "Why did you choose your provider?" 41
Table 5: Responses to the question "When taking out a new credit card, which features would be most appealing?", by credit card user profile 42
Table 6: Responses to the question "How did you make the initial application for your main credit card?", overall and Gen Y 42
Table 7: Responses to the question "How did you make the initial application for your main credit card?", 2009 and 2010 43
Table 8: Channel preferred and used to apply for credit card, by consumers that have applied within the last two years 43
Table 9: Responses to the question "What are the obstacles for you applying for financial products over the internet?", percentage of consumers who answered 'agree' to statements 44
Table 10: Credit card holding in Australia, 2008–10 44
Table 11: Frequency of interest payments, 2008–10 45
Table 12: Responses to the question "What factors would make you more likely to use an EFTPOS/debit card as opposed to a credit card?" Level of agreement (1 = strongly disagree, 5 = strongly agree) 45
Table 13: Contactless card holding and usage in Australia 45
Table 14: Responses to the statement "I would feel safe and happy to use my card without signing or entering a PIN for transactions more" Level of agreement (1 = strongly disagree, 5 = strongly agree), by age group 46
Table 15: Responses to the question "How would you rate the following statements regarding rewards schemes?" Level of agreement (1 = strongly disagree, 5 = strongly agree), by credit card user profile 46
Table 16: Responses to the question "Have you switched your main credit card provider in the last 12 months?", by age group and credit card user profile 47
Table 17: Responses to the question "Why did you switch your main credit card provider?" 47
Table 18: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? 10% interest rate on purchases". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 48
Table 19: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? No fee but the same features". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 48
Table 20: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? Twice as many reward points per dollar spent". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 48
Table 21: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? Wider choice of rewards". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 49
Table 22: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? Twice the credit limit of current card". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 49
Table 23: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? Customizing your card (choose picture and colors)". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 49
Table 24: Responses to the question "How likely would you be to switch your main credit card provider for the following reasons? Premium branding (gold or platinum) at no extra cost". Level of agreement (1=very unlikely, 5=very likely), by age group and credit card user profile 50
Table 25: Credit card users, revolvers, and revolvers that want a higher credit limit, by income level 50


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