Tag Archives: Santander Bank

10 Developments in Recent Credit Card Launches

Over the past six months, EMI has monitored new credit card launches by leading issuers and identified 10 trends.

  1. Issuers are moving away from long-duration introductory rates on purchases and balance transfers (BTs), in particular on travel cards.
  2. A basic earn rate of more than 1% (or 1 mile/point per dollar) is common.
  3. Most cards are offering a higher earn rate for spending in specific categories.
  4. Issuers are not competing aggressively on APR.
  5. The two new affluent cards are metal.
  6. Many cards continue to promote acquisition-and-activation bonus offers
    • Three premium cards (with annual fees) all offered 50,000 bonus points.
    • Three other cards (with no annual fees) promoted bonus offers of 10,000 miles or $100.
  7. In a significant departure from the previous norm, two new no-annual-fee airline cards have been launched
  8. For higher-end cards with annual fees, the robust travel benefits are emphasized over the rewards program as the core justification for the fees.
  9. No foreign transaction (FT) fees on travel cards is now becoming a standard feature.
    • American Express remains an outlier, by continuing to apply a 2.7% FT fee on its travel cards.
  10. Most issuers continue to apply BT fees.

Banks ramp up advertising and marketing spend in 2016

According to EMI Strategic Marketing’s analysis of data from the Federal Financial Institutions Examination Council (FFIEC), U.S. banks spent $17.1 billion on advertising and marketing in 2016.  This expenditure represented 2.4% of bank revenues. Five banks (JPMorgan Chase, American Express, Citigroup, Capital One and Bank of America) each spent more than $1 billion, and together accounted for more than half of the industry’s total expenditure. The following chart looks at 2016 marketing-to-revenue ratios for 20 leading U.S. banks (note that for JPMorgan Chase and Capital One, marketing spend data is provided for both their retail bank charters and card-issuing units).

bank_marketing_spend_2016

Most banks grew their marketing spending in 2016, as they looked to drive revenue growth in an improving economy.  10 banks reported double-digit percentage rises in their advertising and marketing budgets.  In some cases (e.g., KeyBank and Huntington), the strong increases were in part the result of significant bank acquisitions.

13 banks grew their marketing-to-revenue ratios in 2016.

  • Half of the banks in the chart (mostly branch-based banks) have marketing-to-revenue ratios of between 1.5% and 3%.
  • Several banks have been ramping up their marketing spend in recent years.  Between 2014 and 2016, Santander Bank’s spend nearly doubled between 2014 and 2016, and its 2016 marketing-to-revenue ratio of 4.0% was the highest among branch-based banks.
  • At the other end of the scale, both Wells Fargo and BB&T have ratios consistently below 1%.

Credit card-focused banks/bank charters have the highest marketing-to-revenue ratios.

  • Chase Bank USA (JPMorgan Chase’s card-issuing bank) had a ratio of almost 20% in 2016.  The sharp rise in the ratio from 2014 and 2015 was due to both a 6% rise in advertising and marketing spend (to support the launches of Freedom Unlimited and Sapphire Reserve), as well as a sharp decline in noninterest income.
  • American Express increased in its advertising and marketing spend by 15% in 2016, and its ratio rose to nearly 12%.

As banks look to scale back their branch networks both to save costs and adapt to changing bank channel usage (in particular for everyday banking transactions), they are also cognizant of the potential loss of the branch’s role as a branding beacon in local markets.  Therefore, it’s likely that a portion of the cost savings from branch network reductions will be diverted to advertising and marketing budgets.  As a result, we may expect banks’ marketing-to-revenue ratios to gradually increase in the coming years.