Five years after landing in the United Kingdom, MBNA Corp. is still a long way from the kind of stronghold it has in the United States.
But that is no reason for traditional British lenders to rest on their laurels.
Card industry observers have seen the American invasion - MBNA was followed by Capital One Financial Corp., People's Bank of Bridgeport, Conn., a joint venture of Advanta Corp. and Royal Bank of Scotland, and First USA Inc. - as a breath of fresh air. Analysts said domestic card issuers had failed to cut rates when underlying interest rates dictated a change.
But "the U.K. market is still tough for new providers to enter, because of the dominance of established commercial banks," said James Johnson, a banking analyst with Credit Lyonnais.
Barclays, with 6.8 million cardholders - a third of the market - says MBNA cannot match its brand presence.
Chris Tucker, a Barclays spokeswoman, said MBNA may have been more of a threat to "smaller lenders who don't go in for cobranding. The big banks can certainly see off the challenge."
U.S. banks may have found it difficult to get access to customer data bases because the U.K. approach to them differs, she said, "but with technology and customer attitudes perhaps being affected by the approach of the American banks, it may be getting easier for new providers."
Though more Britons have a Barclays credit card than any other, figures produced by Bank of England at the end of 1996 showed a 700,000 decline in Barclaycard holders. Bank of England statistics as of March 1997 showed American banks provided 2.6% of outstanding consumer credit in the United Kingdom.
Mr. Johnson estimated that "by March 1998, American banks like MBNA would have improved on that 2.6%" and "their influence is starting to bite at margins."
MBNA's vice chairman David Spartin in Wilmington, Del., contended that the trans-Atlantic differences amount to very little.
"When we decided to go into Britain, everyone told us it would be difficult," he said. "The markets were supposed to be too different, and our approach in the U.S. wouldn't suit British people."
"But we have found that is not the case. British people are proud to carry credit cards that affiliate them with a particular organization," Mr. Spartin said, referring to the No. 2 U.S. issuer's reliance on affinity- group affiliations.
If the nationwide U.K. retail banks are MBNA's strongest competitors, smaller regional banks and building societies are providing it with some marketing power. MBNA, which has its British base in Chester, has among its 530 endorsement deals the Bradford and Bingley, Cheshire, and Newcastle building societies, which are roughly equivalent to savings and loans.
MBNA also issues cards for stores, universities, and charities. By association with prestigious organizations like Oxford University and the Prince's Trust - the charity arm of the Prince of Wales - MBNA could go a long way to overcoming its brand weakness. Its 56% growth in 1997 seems to indicate the possibilities.
Mr. Spartin said American consumers are still more comfortable than the British with credit cards. "It is true Britain still lags behind the U.S.," he said. "America has a more electronic system, but I don't see the British market as being any more tough."
He said that in MBNA's operation "the physical distance between the Delaware headquarters and Chester is the only inconvenience."
New credit card competition is seen as good news for British consumers. Though most of the cards issued by MBNA are no-frills, offering little besides a low initial interest rate, they have spurred other institutions to set up loyalty schemes to retain customers.
Barclays gives customers points that can be exchanged for lower interest rates, mobile phones, or partial payments on cars. Alliance and Leicester, a building society, offers cash back for credit used.
Ms. Tucker at Barclays conceded that competition has increased greatly since the Americans joined the fray. "We have been forced to follow what new entrants like MBNA have been doing very closely," she said.
Ms. Dargie is a freelance writer in London.
