Making its first international foray, Advanta Corp. has entered into a joint credit-card-issuing venture with Royal Bank of Scotland.
Their new company, RBS Advanta in Edinburgh, will start issuing MasterCard and Visa cards in the United Kingdom around yearend, Advanta announced this week.
Following other U.S. credit card specialists abroad, Advanta should do well, analysts said. MBNA Corp. and Household International are already active in the United Kingdom, and Citibank's card unit has made international growth a priority.
Advanta's move suggests another credit card niche company - First USA Inc. - will follow into the less cluttered, less mature European markets.
"It seems like a very innovative marriage for the skills Advanta brings with information-based marketing and the knowledge Royal Bank has with the U.K. marketplace," said K. Shelly Porges of Porges/Hudson Marketing Inc. in San Francisco.
"We are firmly committed to taking things we've learned here in the United States and moving them on to selected other markets" where consumer credit bureau data are reliable, said Alex W. "Pete" Hart, Advanta's executive vice chairman and former president of MasterCard International.
Advanta, based in Horsham, Pa., reported having more than four million customers and $9.8 billion in managed assets at March 31. Advanta is the 14th-largest card issuer in the United States, with $7 billion in credit card receivables, and is also active in home equity lending.
The company, which issues cards through Colonial National Bank (USA) in Delaware, has named John F. Mullady, a 25-year credit card veteran and former chief operating officer of First Omni Bank, general manager of the U.K. venture.
With assets of $78 billion, Royal of Scotland is the U.K.'s fifth- largest commercial bank and a major card issuer. It will own 51% of RBS Advanta, while Advanta Corp. will have 49%.
"I believe this new operation will have the capacity to transform the credit card market in the U.K., combining our knowledge and experience as a leading credit card issuer with Advanta's unique expertise in direct marketing, targeting, and risk management," said Norman McLuskie, managing director of Royal Bank's operations division.
"I am confident this combination will enable us to expand significantly the credit card market in the U.K.," said Mr. McLuskie, who will be RBS Advanta's chairman. Mr. Hart will serve as a director.
The U.K. card market has fewer issuers than the U.S., with Barclays Bank of London controlling a 40% share, said Thomas P. Facciola, an analyst with Salomon Brothers Inc. In terms of balances, he said, the United Kingdom's $45 billion is a distant second to the United States' $250 billion.
"The U.K. market looks a lot like the U.S. did in the 1980s," Mr. Facciola said. Big banks dominate, but an Advanta can gain share by competing on price.
Typically, Barclays, National Westminster, Midland Bank, and others offer credit cards at 19% and up, and the marketing is bland, Mr. Hart said. "Our intention would be to do as we have done here, with risk-based pricing woven into the offerings, and to just take an extremely sophisticated approach to customer identification and solicitation and risk management."
In assessing opportunities overseas for Advanta, Auriemma Consulting Group Inc. found the United Kingdom an ideal first stop because English is spoken and consumers have embraced credit cards much like Americans, said Michael Auriemma, president of the Westbury, N.Y., firm.
MBNA Corp.'s year-old British operation accounted for 6% of the Delaware-based affinity card marketer's net increase in receivables in 1994, said Susan L. Roth, an analyst with Bear, Stearns & Co.
MBNA has signed contracts with 150 U.S. affinity groups, and March 31 outstandings were $500 million, Ms. Roth noted. "We expect a growing contribution from the company's overseas operations," she said in an April report, and a likely expansion into France or Germany within a year.
"There are challenges in moving overseas; you don't want to take away your management strengths," Mr. Auriemma said.