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September 22, 2008

BNP Paribas cards seeks global scale

Gilbert Arira, BNP Paribas head of cards and electronic banking, has outlined a fourpoint plan designed to unlock the underexploitedpotential of its cards business.

By Verdict Staff

Gilbert Arira, BNP Paribas’ head of cards and electronic banking, has outlined a four-point plan designed to unlock the underexploited potential of its cards business.

In an interview with Cards International, Arira said the reorganisation of BNP Paribas’ retail bank, which aims to link up its international consumer banking enterprise, would help the cards business take advantage of its global scale. He also mapped out his strategy to increase the cards unit’s profitability – including an ambitious aim to sign up each of its 17 million retail banking customers to a card product:

• ‘One account, one card’: Arira said the bank is aiming to cross-sell cards to more of its retail banking customers across the franchise

• Activation: ensuring customers continue to spend on BNP Paribas (BNPP) products once they have signed up for a card

• Customisation: allowing customers to choose card designs and customise features, benefits and loyalty on cards

• Internet distribution: the business aims to originate 10 percent of card sales through the internet within the next two years, and offer online customisation services.

BNP Paribas, which won CI’s award for Best Consumer Finance Business in 2007-08, has 45 million cards in issue, 25 million of which are credit cards and 20 million are debit and deferred debit cards. Of those, 39 million are outside France. The cards unit, which is now part of the bank’s Personal Finance division, contributes around 8 percent of BNPP’s retail banking profit. That equates to a half-yearly profit of roughly €196 million ($278 million) on retail banking profit of €2.45 billion.

Arira added: “We are going through a major reorganisation in retail banking to become more globally focused, and cards will be one of the main drivers in the organisation. It is starting now and the goal is we want to be a global player.”

Arira believes the best opportunities for growth exist in Central and Eastern Europe (CEE) where credit cards are not widespread, Latin America, and in North Africa. In many CEE countries, credit card businesses see an opportunity to switch consumers from salary cards, used mainly to withdraw cash from ATMs, to more advanced product offerings which can be used for internet and point of sale purchases.

The bank is also placing an emphasis on standardising cards products across its subsidiaries and building universal platforms to reduce costs and improve customer service – a process also being undertaken by rival HSBC.Arira said the main issue in the cards industry remains the uncertainty around interchange from the European Commission. The Commission recently ruled MasterCard’s cross-border fee illegal, and is also investigating Visa Europe’s cross-border interchange charges. But it has continued to push the idea of a third pan-European scheme to compete with Visa and MasterCard, which it recently indicated may be permitted to charge interchange.

Arira added: “The Commission is saying one thing one day and something else the next. It is difficult to know where they want to go. It is a critical component of the business – one-third of it comes through interchange – and in many areas if you come to zero interchange you come to a non-profitable business. There are also pressures in the US as well and it is difficult to invest without knowing what the return on investment will be.”

See the next edition of CI for a more in-depth interview and a case study of BNPP’s co-branding business in France.

Business Split

William Cain

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