April 22, 2010 08:00 ET

Canadians to See Dramatic Shift in Credit Card Offerings

Deloitte: Consumers and issuers to benefit from new industry trends

TORONTO, ONTARIO--(Marketwire - April 22, 2010) - In the wake of record industry losses, consumer bankruptcies and the recently announced voluntary Code of Conduct for the Credit and Debit Card Industry in Canada, the credit card industry has been transformed from one of the most profitable areas of lending to one of the least. According to a new Deloitte report, Charting a new course for the credit card industry, two things are clear: issuer strategies need to change and, in many cases, consumers will benefit.

"The industry is at a turning point and forward-looking issuers will use new market dynamics as an opportunity to innovate, introduce new products, and improve relationships with consumers and merchants. This will bring about a new generation of card and payment services — many of which will directly benefit Canadian consumers," explains Pat Daley, Leader of Deloitte Canada's Payments Practice.

"In response to existing and emerging market forces, credit card issuers are considering a number of options, from redefining their business and operating models to exiting the business altogether," says Daley. The credit card industry has been caught in a perfect storm: record net losses driven by increased debt and rising consumer bankruptcies have occurred at a time of increased government regulation.

"Some companies have set up project management offices to execute a number of quick changes to products, pricing and lines of credit, while others are taking a longer-term approach, revising business, governance and operating models to reflect the needs of today's new marketplace."

Trends emerging within the Canadian credit card industry

As forces such as the growth of Internet commerce transform the industry, Deloitte suggests that the concept of a credit card and the form it might take are likely to change significantly over time and assume both a physical and virtual dimension. 

According to Deloitte, there are eight emerging changes to the payments landscape:

  1. Credit cards and bank accounts will start to merge – Combining credit cards with other banking relationships could make credit cards more relevant to a new generation of thriftier consumers. Credit card issuers could provide deposit services by allowing consumers the opportunity to prepay their credit cards and/or receive interest or more favourable credit terms. Issuers might also consider offering deposit services, where the balance could support existing borrowings, justifying lower interest rates or higher credit limits based on the demonstration of the borrower's liquidity.
  1. Social networking sites and PDAs will be used as payment platforms – Canada will begin to see the deployment of online payment services to Generation Y or Generation X consumers through personal digital assistants (PDAs) and social networking sites. These sites provide functionality for consumers to make online purchases through various mechanisms such as the introduction of a virtual currency (purchased via debit/credit transactions)—mechanisms which will continue to see widespread consumer adoption. Also, "e-wallets" such as PayPal may extend their online dominance by developing micropayments solutions for platforms like Facebook, and replace local payment systems such as Interac.
  1. Mobile phones will be used as payment devices – Electronic payment forms such as mobile phones are already beginning to replace traditional card-based payments in some parts of the world, such as Europe and Japan—especially for person to person transfers, point of sale, and m-commerce transactions. Convenience for consumers will drive the adoption of mobile payments using near field communications. Consumers concerned about providing credit card details over the Internet for m-commerce are likely to prefer the mobile e-purse form of payment
  1. Loyalty programs will increase significantly between card issuers and retailers – Many Canadians choose credit cards based on rewards. Consumers will see issuers start to proactively partner with retailers to make relevant offers that are more attractive to existing and potential consumers. This is a popular approach in the UK where some issuers create targeted offers jointly with merchants, market the rewards electronically, and automate redemption.
  1. There will be a rise in the use of prepaid cards for recurring payments – The pay ahead payment concept of prepaid cards (as opposed to the pay later concept of credit cards) is on the rise as a way to distribute rewards or benefits to particular classes of consumers, and especially as a way of delivering government payments to individuals.
  1. Credit card holders will see an increase in security features that prevent fraud The implementation of security features such as chip-based credit cards (that require PIN authentication) will become widespread and will help minimize fraud. These security measures are in part due to the significant increase in credit and payment card fraud over the last few years. Further security mechanisms will be layered on top of chips to continue to prevent fraud over time.
  1. Consumers will be educated on responsible debt management – Credit card issuers will be introducing a number of innovations in their approach to client relationships to help champion consumer concerns with the goal of establishing lasting consumer confidence, trust, and loyalty. This will include new approaches to educating consumers on responsible debt management.
  1. Some credit cards will be cancelled, but there will be new ones to choose from – Given the significant challenges and future uncertainties facing the credit card industry, some issuers will exit the credit card business entirely, while others will choose to remain in the credit card business, but retrench by eliminating product lines and redefining operating models. However, there will also be new entrants in this market, particularly well-known retailers and e-wallet providers.

For a more detailed discussion of the top issues emerging in the credit card industry and the full report, Charting a new course for the credit card industry, go to

About Deloitte

Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,700 people in 58 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

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