Financial investment--Plastic Cards in Hong Kong 2005

Key findings 12

Country overview 12

Country overview 13
Economy 14
GDP and GDP per capita 14
Inflation 15
Distribution of income (GINI Coefficient) 16
Sectoral composition of the economy 16
Demographics 17

Market size 18

Payment cards in the context of consumer payments 18
Housing and consumer credit have increased with some volatility 18
Credit card debt has caused some concerns in Hong Kong 19

Payment card statistics 20
There are approximately 12.6 million credit cards in Hong Kong 20
In 2004 the total value of transactions on credit cards in Hong Kong fell to HK$219.4 bn 21
Balances outstanding on credit cards at the end of 2004 exceeded HK$24bn 23
By the end of 2004 the number of debit card accounts in Hong Kong was greater than 2.6 million 23
The number of transactions on debit cards has increased to 80.0 million 24

Market infrastructure 25

ATM statistics 25

Regulatory environment 25

Industry regulators 25
The Hong Kong Monetary Authority (HKMA) 25

Industry associations 26
The Hong Kong Association of Banks (HKAB) 26
Hong Kong Interbank Clearing Limited (HKICL) 26

Credit bureaux 27
Commercial Credit Reference Agency (CCRA) 27

Regulatory issues in the market 28
Improvements by the CCRA 28
Interchange fees 28

Key findings 29

Card scheme market shares 29

Visa leads the credit card market in Hong Kong 29
American Express is the market leader for charge cards 31

The significance of the Australian card market for Hong Kong. 31
Hong Kong's credit card market is a similar to Australia's 31

Card issuer market shares 32
Leading card issuers in Hong Kong 32

Competitor developments 33

Market entry, exit, consolidation, strategy change 34
AEON charges in as the first non-bank credit provider 34
General Electric (GE) Money Hong Kong set to enter the market in 2006 34

Issuer strategies and attitudes to card products 35
Credit cards are marketed towards 'lifestyle profiling' 35

The number of cards offfered by issuers 35

Product analysis 36

Typical product design - price, fees, incidence and type of loyalty 36
Product differentiation is the predominate competitive strategy 36

Product innovations in the market 41
Credit card marketing for different consumer groups. 41
Co-branded cards are increasingly more prevalent in the market 46

Recent developments in Hong Kong's credit card market 50
Is there a potential for marketing to start focusing on the price of credit cards? 50
The future for credit cards in Hong Kong 51

FORECASTING THE PLASTIC CARD MARKET IN HONG KONG 53

Forecasting the pay later card market 53

Macroeconomic Factors 53
The number of credit cards accounts will increase to greater than 11.8 million cards 54
The total value of transactions will tip HK$272.5 billion by 2009 56
The average rollover balance will rise in the near future to HK$2,712 in 2009 57

APPENDIX 60

Supplementary data 60

Definitions 64

Balances outstanding 64
AAGR 64
CAGR 64
Charge card 64
Credit card 64
Interchange 65

Future readings 66
Relevant links 66
Custom research capabilities 67
SPP writing team 68

List of Tables

Table 1:   HSBC has the largest market share but offers less credit cards than smaller issuers such as DBS 41
Table 2:   The underlying macroeconomic factors used to forecast from 2005-2009 54
Table 3:   GDP at constant 2000 prices, 2000-2004 60
Table 4:   GDP per capita at constant 2000 prices, 2000-2004 60
Table 5:   Consumer price inflation, 2000-2004 60
Table 6:   Household credit as a percentage of GDP in Hong Kong 61
Table 7:   Components of household credit as a percentage 61
Table 8:   Number of credit card accounts in Hong Kong over the 2001-2004 period 61
Table 9:   The total value of transactions 62
Table 10: Number of cards per scheme in Hong Kong over the 2001-2004 62
Table 11: The number of cards per scheme on Hong Kong 2004 62
Table 12: The number of credit cards per issuer in Hong Kong 2004 63
Table 13: The forecasted figures for Hong Kong credit card market over the 2005-2009 period 63

List of Figures

Figure 1:   Overview of Hong Kong 13
Figure 2:   Hong Kong has experienced inconsistent GDP growth over the 2000-2004 period from 0.5% in 2001 to 8.1% in 2004 14
Figure 3:   GDP per capita in Hong Kong is high in comparison to other countries in the region at US$27,597 in 2004 15
Figure 4:   Hong Kong experienced deflation over the entire 2000-2004 period 16
Figure 5:   Year on year growth of household credit has fluctuated in Hong Kong over the 2000-2004 period 18
Figure 6:   Credit card debt is a small proportion of total household debt in Hong Kong in June 2004 19
Figure 7:   The average growth rate of credit card accounts in Hong Kong was only 0.3% from 2001 to 2004 21
Figure 8:   The average growth rate of the total value of transactions is 22
-4.4% over the 2002-2004 period 22
Figure 9:   There is a negative relationship between the number of credit card accounts and the total level of spending and consequently the average spending per credit card has fallen 23
Figure 10: Visa is the leader in credit cards in Hong Kong in 2004 30
Figure 11: HSBC is the credit card market leader with 18.2% of the market 33
Figure 12: UOB OCG's Lady's Card's has a large market potential with the minimum income level of HK$80,000 42
Figure 13: DBS's Woman's Card has a lower minimum income level when compared to UOB OCG's Lady's Card 43
Figure 14: The 'Y not' credit card offers consumers a personalized credit card face 44
Figure 15: The Looney Tunes Credit Card is marketed at young consumers 45
Figure 16: The health credit cards available in Hong Kong 47
Figure 17: Dah Sing's Manchester United MasterCard allows consumers to reflect their personal interests in their credit cards. 49
Figure 18: The total number of credit card accounts will rise to 11.8 million by 2009 55
Figure 19: The total value of transactions will rise to HK$272.6 bn in 2009 57
Figure 20: The rollover balance per card is expected to start rising in 2006 to HK$2,712 in 2009 58
Figure 21: The total rollover balance has historically lagged behind the number of cards and the rollover balance 59
Figure 22: Core consulting capabilities 68