The co-branding of banking cards (i.e. both payment and credit cards) is effective in France since October 1, 2007. Co-branding means the right to reproduce marks or trade names on banking cards in addition to the corporate name and logo of the issuing bank. This is a little revolution in a country where regulatory constraints have long limited marketing innovations.
1. Context of the French market of cards
France is the biggest market in the Euro zone concerning payments made by cards, with a rate of 37% ? compared to rates of 17% in Germany, 10% in Spain or in the Netherlands and 8% in Italy. Cards are the favourite payment instrument for 73% of the French, whereas this rate is of 57% and 34% respectively in the UK and Germany (Sofres study, 2006).
According to articles L. 311-1, L. 311-3 and L. 511-22 of the Financial and Monetary Code, issuing and managing payment cards in France as well as providing credit services is strictly reserved to banks agreed by the French regulator or acting under the European passport.
The Financial and Monetary Code provides for a limited series of exceptions to such so-called ?banking monopoly?, such as mono-provider cards (for instance private cards issued by retail companies) and multi-provider cards under certain specific conditions (article L. 511-7 of the Financial and Monetary Code). The French regulator closely controls compliance to these conditions and few companies are able to comply.
Until October 1, 2007, the rules related to banking cards did not allow co-branding, thus limiting the development of products such as private cards. As a consequence, a great portion of payments made by cards is made through banking cards: 87% of the French hold at least one banking card (with an average of 1.4 cards per person) and the total of banking cards issued amounts to 53 million with an annual growth of about 5 % and a record satisfaction rate of 97 % (Sofres study, 2006).
2. The decision of Groupement des Cartes Bancaires to authorise co-branding
The Groupement des Cartes Bancaires provides for interbank standards through contractual as well as technical requirements to all the users of the system ? cardholders, banks and merchants ? including normalisation of the devices and requirements concerning the nature and position of the information labelled on the cards. Apart from banks operating selective or private networks, such as American Express, banks that wish to benefit from the general acceptance of the ?CB? interbank system must comply with such standards and requirements.
The authorisation of co-branding results from an amendment to the banking card model contract issued by the Groupement des Cartes Bancaires. All the members of the Groupement will have the benefit of this decision, including its 148 member banks, among which 35 foreign banks.
3. The opportunities of co-branding
Waiving the branding restriction provides great market opportunities to banks as well as to brand companies.
Firstly, banks will be able to use their cards as a marketing vector with their customers, providing new B2C services such as affinity cards and giving way to diversification on a strong yet mature banking cards market. Société Générale has already launched a ?Rugby World Cup 2007? banking card offering specific services to their holders, from which the bank expects to attract new clients.
Secondly, banks will also be able to develop B2B partnerships with brand companies (such as retailers) which may be interested in providing financial services to their customers and thus enlarge their own private card programs by providing banking services. Brand companies will find a particular interest in providing credit services to their customers ? an activity reserved to banks. Analysts consider that a credit service embedded on a private card may increase the average purchase amount of 50 %. On the other hand, banks hope to develop their credit cards offer ? credit cards only represent 5 million out of the 53 million banking cards currently in use.