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Published:August 6th, 2010 14:14 EST
Canadian Credit Card Market: Tough Sledding

Canadian Credit Card Market: Tough Sledding

By SOP newswire2

Boston, MA -- The credit card market in Canada has long been the focus of intense competition among the leading Canadian banks, with the plethora of reward programs providing evidence of their non-stop battle to motivate usage.  In the harsher current economic climate, have they perhaps overdone it?  Mercator Advisory Group`s new report The Canadian Credit Card Market: Tough Sledding examines the relative positioning in Canada of the major card networks, and takes a closer look at the activities of the top 15-20 card issuers.  We examine the strategies intended to increase card account numbers, as well as those intended to increase utilization rates on cards outstanding.

"The events of the past year have significantly unsettled the credit card market in Canada.  The level of competition for customer accounts has been increased by both new entrants and the legalization of dual network-branded issuing.  At the same time, the economic recession is driving up household debt levels as well as card delinquencies and write-offs.  Factoring in the cost of rewards programs, some card issuers will struggle to preserve profitability in the near term." states Patricia McGinnis, Director in Mercator Advisory Group`s Banking Group.
The "Big Five" Canadian banks hold leadership positions in this market, but they continue to be challenged by second tier domestic financial firms, by the Canadian subsidiaries of major foreign banks, and by card market entrants from the retail sector, including most recently the new Walmart Bank Canada.

To preserve profitability and avoid excessive losses in the current macro-economic environment, lenders must recalibrate most existing credit models and develop new strategies to respond to credit deterioration.

Dual-issuing is now allowed, and some issuers are already taking the bait.  In a market already so saturated, we do not believe that simply issuing a new card of the "other" network will significantly change market positioning.

Among the leading Canadian banks, CIBC has built a volume of business significantly more than proportional to the bank`s asset size in its market. 
Source: Mercator Advisory Group