MBNA Corp. says it chose Spain as the first non-English-speaking country where it will issue cards because of its location in continental Europe, its relatively strong economy, and its demonstrated appetite for credit cards.
"We looked at a variety of countries" for expansion, said Brian Dalphon, a senior executive vice president at MBNA, said last week. It concluded that Spain is "a good market for credit cards," he said.
The Wilmington, Del., issuer said Tuesday that Spain's central bank, the Bank of Spain, had approved its application for a branch license that will let MBNA market cards in Spain by the fourth quarter. It is also in Canada, the United Kingdom, and Ireland.
"Spain is similar to the United Kingdom in 1993, and that is perfect for us," Mr. Dalphon said. The only available credit bureau data there is negative material - about customers with delinquencies on their records - but "we are used to talking to people and gathering our information," Mr. Dalphon said.
He said MBNA does not view the Spain entry as a springboard to Latin America or other Spanish-speaking countries. Conditions in those markets are quite different and the economies less developed, he said.
MBNA was swayed by figures supplied by the Bank of Spain that Spaniards carried $8 billion of credit card debt and $30 billion of other unsecured loans and that the market for credit cards is estimated to grow 33% a year compounded through 2005.
MBNA uses Experian as its credit card processor in Ireland and the United Kingdom, where the company has 7% and 13% market share respectively. It will eventually process its own loans in Europe and is building its processing capability, Mr. Dalphon said.
Citigroup Inc., American Express Co., and Barclays Bank all issue credit cards in Spain. But Mr. Dalphon said his company's primary competition would come from large Spanish banks, and that it plans to play to the same strength - affinity marketing - that has made it the No. 2 U.S. issuer.
"We have 20 people there already talking to affinity groups in Spain, trying to get organizations to sign up with MBNA," he said.
In the United States, MBNA issues cards in conjunction with more than 4,500 organizations. Likely partners in Spain include universities, sports teams, and professional organizations.
"I think this is a step on the way to what could be a long-term-growth story for MBNA across the continent of Europe," said Kenneth A. Posner, an analyst with Morgan Stanley Dean Witter & Co. "Europe will be complicated and difficult, because every market is small and different. Just think about the challenges of setting up call centers for every country."
He suggested that Italy, the Netherlands, and Scandinavia might come next. "MBNA is very committed to making money," he said.
Prudential Securities Research analyst Bradley G. Ball said the move was necessary given the lack of growth in the U.S. credit card market. "Spain is a market with a lot of opportunity, but is not as accustomed to unsecured revolving credit card products," he said. "It will take a sizeable investment and a long period of time to pay off."
