Foreign markets are the next logical places for credit card issuers to find growth, several experts said at a conference last week.
Consumers in Europe, Asia, and Latin America are particularly eager for revolving credit, but the products are less accessible than in the United States, said speakers at Faulkner & Gray's annual Credit Card Forum.
A handful of U.S. issuers - including Citicorp, American Express Co., and MBNA Corp. - are active in foreign markets, but most are focusing only on the domestic market.
"Traditionally we haven't done much internationally, and U.S. bank card issuers are relative Johnny-come-latelies" in other countries, said William Keenan, president of the Convergence Group, Greenville, Del., and a former senior vice president at Natwest Bank. "I believe there are substantial opportunities outside the United States."
In Western Europe, card penetration is low and interest rates are high. Citibank, MBNA, Household Bank, Advanta Corp., Capital One Financial Corp., and Associates First Capital Corp. have moved in - but the markets are dominated by local institutions.
In the United Kingdom the branch banking giants, known as high-street banks, "control 70% of the market, but only the BarclayCard is sustaining continued growth," said Mr. Keenan, referring to the market-leading Barclays Bank product.
"Foreign markets are very different from our own," Mr. Keenan said. "Proximity is less of an indication for success than cultural understanding."
Asia and the Pacific Rim may be for U.S. card issuers, said Roger Swales, executive vice president at PSI Global, a research and consulting firm in Tampa. Consumers in those regions tend to be young, mobile, value-conscious, and not particularly loyal to a local financial institution, he said.
"The revolving credit phenomenon has not really bitten yet" in the Asia- Pacific region, said Mr. Swales, who is based in Singapore. "The consumer wants revolving credit, but it's not being offered."
Economic development indicates how much credit card opportunity is left. Hong Kong is extremely saturated, with five million cards issued to six million people, Mr. Swales.
In Indonesia, a developing country with a population of 200 million, only 1.7 million cards have been issued, and half of those are dormant, Mr. Swales said. China and India together represent a quarter of the world's population, yet card penetration is minimal.
"Markets there are opening up, becoming more entrepreneurial and quite vibrant," he said. "If you are a global company and you don't have a China strategy, then you won't be global for long."
Even in developed countries like Australia, there may be roles for U.S. banks to play. Large parts of the country are unbanked, Mr. Swales said, and the population is thirsting for innovative card products. What few reward and affinity programs have been offered there have been great hits, he said.
"Cost of (customer) acquisition will continue to increase in Asia- Pacific as new international players enter," Mr. Swales said. "Because of this and tighter central bank regulations, margins on credit cards are expected to shrink in the future."
Astrid Rial, president of Arial Internacional, a training and consulting firm in Tacoma, Wash., said she sees similar patterns in Latin American countries, where an emerging middle class is contributing to the popularity of cards. Mexico, Brazil, and Argentina are considered in the top tier of countries ready for more credit cards; Colombia, Venezuela, and Peru are in the next tier.
"The market is definitely underpenetrated," Ms. Rial said. "There is a lack of credit culture - people aren't accustomed to using revolving credit."
Developing countries pose obstacles. If technology lags, processing is done by hand or on antiquated computers. And interest rates run high: Ms. Rial said they can go above 100%. Merchants may need separate terminals for each card brand, and their cost means many stores take just one type of card. Credit bureaus are often primitive or nonexistent, perhaps providing lists of people who have not paid bills.
"Lack of credit bureaus means there are few consequences for not paying," Ms. Rial said.
Card ownership in Brazil has doubled since 1994, and 21.5 million total cards are expected to be issued by yearend. Telecommunications are improving and affinity cards - whether for soccer teams or pop stars - have been a hit. Economies are stabilizing, and the profit potential is high, Ms. Rial said.
"Cobranding is definitely the way that most banks are offering new credit" in Latin America, she said. "The cobranded cards have been very successful in having higher transaction volumes per card."
