Landesbank Berlin (LBB) is the regional market leader through its Berliner Sparkasse and Berliner Bank brands, and has a market share of close to 50 percent of customers in the Berlin area. It is the market leader in the German credit card business overall, with over 1.6 million cards issued. Although the credit card industry in Germany is not particularly strong for such an affluent country, over the past few years LBB has been able to grow its cards business respectably through a number of innovative products and co-branding measures.
LBB’s credit card business last year was robust. In 2002, the bank’s management adopted a strategy of strengthening its retail customer relationships and was able to make the most of cross-selling opportunities from its core customer base. Its national ambitions were scaled down somewhat as management decided to place more emphasis on its strong regional capabilities.
A crucial element of this approach was a substantial development in the retail banking sector of credit cards with co-branding or white-label branding, an area in which LBB had the experience and infrastructure to perform well. The bank also developed strong credit evaluation and monitoring systems, and by utilising the technical knowledge gained from its card operations, LBB has expanded its consumer lending operations to include POS lending for household durables.
Through successful co-branding schemes with institutions such as European automobile club ADAC, online retailer Amazon Deutschland and Air Berlin, LBB has firmly established itself as a leading card issuer in Germany. Of its 1.6 million cards issued, approximately 1.4 million are co-branded products. In 2006 its 1 millionth credit card was issued. The LBB card in conjunction with Air Berlin allows the customer to collect Air Miles as well as make non-cash payments for goods and services with MasterCard-registered companies; this credit/debit card hybrid is the first of its kind in Germany.
The Amazon.de credit card was launched in November 2006. It is an online-only service that lets customers purchase goods from the website, and features a strong loyalty rewards programme. Within eight months of the launch, LBB had issued 100,000 cards.
LBB is also focusing on marketing its card products towards younger Germans. This is particularly noticeable in LBB’s prepaid business, which is primarily targeted at young adults with a low credit score, or minors who are forbidden by law to have credit. At present, there are only 65,000 prepaid cards, but according to Tilo Schürer, head of marketing for LBB, it is the bank’s fastest-growing card segment.
In August 2005, the bank launched several products in conjunction with Microsoft. The cards were branded with Microsoft’s Xbox game console, and they ranged from an online-only prepaid card and a credit card for young adults with a low spending limit, to a premium credit card with a standard threshold. Last year, LBB took another step towards broadening its card portfolio by launching co-branded cards with numerous companies such as online service provider AOL, a virtual community named Habbo Hotel, and Universal Music Germany.
Alongside its prepaid range of products, gift cards have been an area of solid growth for LBB. Although these cards are relatively new to the German market, LBB has been quick to capitalise on their potential, pointing to their one-time set-up fees and value-added services such as personal designs and messages as consistent revenue drivers. One notable product in the gift card portfolio is the My Shopping Card range. These MasterCard-authorised gift cards are available with four loadable values ranging from €100 to €1,000, and can be used at more than 1,500 retailers in 31 different ECE shopping centres around Germany.
New wave of customers
Prepaid and gift cards have shown enormous potential in the last few years; LBB reports that both these sectors have achieved triple-digit growth since 2005. One other key factor of this market is that the products require an innovative push from the issuer to make them appealing to a new wave of consumers. As such, prepaid products have introduced LBB to new customer sectors.
The opportunity for up-selling and creating brand loyalty among a younger set of customers is one on which the bank is eager to capitalise.