Romania a hotbed of credit growth

Eastern Europe’s emerging consumer economies
are prime targets for credit card growth, both for domestic and
foreign issuers, and Romania is no exception (see
CI 397).

Following Romania’s accession to the European
Union in January 2007, its economy has expanded at a steady rate. A
rapid rise in average monthly wages has increased levels of
consumer expenditure. Despite the country’s card market only being
in existence for around 10 years and a corresponding lack of
consumer awareness, many issuers are targeting the Romanian market
with a range of increasingly sophisticated card products.

In 2000, there were only 48,000 credit cards in
circulation – by 2006, the figure stood at 1.28 million, out of the
9 million bank and non-bank cards in circulation. However, it is
non-banks which have the greatest market share in terms of credit
cards issued due to strong relationships with Romanian retailers,
although co-branding with banks is also common.

Romania’s card penetration ratio shows
significant potential for growth. According to research from Roland
Berger Strategy Consultants, Romania achieved approximately 419
bank cards per 1,000 inhabitants at the end of December 2006, which
is well below the European Union average of 1,454.

Market estimates place the number of non-cash
card transactions at approximately 16 percent of total card
transactions. In terms of value, however, cash withdrawals are by
far the most popular transaction, with card payments at the POS
representing under 10 percent of total card transactions, due to
predominant usage of debit cards.

Despite the low penetration rate, both domestic
and foreign issuers are beginning to differentiate their offerings
with segmentation strategies more common in developed western
European markets.

Banks are now tailoring their products with an
eye on specific customer needs, and increasingly issuers are
targeting niche client segments, such as students or high-end
customers.

In 2006, Bank Transylvania launched what it
claimed was the country’s first Platinum card, a Visa Platinum
product, designed “for the most sophisticated clients of the bank
and ensuring accordingly tailored services, being created to offer
major advantages to a certain category of persons”. Bank
Transylvania’s Visa Platinum card was aimed at consumers with net
monthly incomes of over €3,500 ($5,425), and the card came with a
credit line of up to €30,000.

Now,
Citi has launched classic and gold credit cards incorporating
unique security features. “Bringing the number one credit card in
the world to Romania is a reaffirmation of Citibank’s commitment to
the local market. Citi Card Visa is a key product for the bank, at
international level, and represents an important strategic step for
new investments in our operations in Romania,” said Shahmir Khaliq,
Citi’s Romania country officer. “We expect to be one of the leading
card issuers in the market over the next few years.”

“The decision to enter the Romanian market was
carefully evaluated and followed an extensive research study
performed by Citi’s traditional partner in Europe, Research
International,” said John Hays, country business manager of the
Consumer Bank unit for Citibank Romania.

“The conclusions of the report were that credit
card ownership is still considerably low in Romania,” he added.
“Out of the total bank cards issued, only 7 percent are credit
cards and their usage, still mainly related to cash withdrawals
from ATMs or bank branches, is affected by barriers such as habit
and security concerns.”

Citi’s Romanian cardholders can personalise
their credit cards with their picture and signature, and there is a
monitoring system that tracks the credit card owner’s shopping
habits and identifies suspicious transactions.

Any such transaction is verified by phone with
the credit card owner and, in case the fraud is confirmed, the
credit card is blocked. The minimum income for a Citi Visa Classic
is RON570 ($243) for employees and retired persons, and RON1,500
for entrepreneurs and freelancers. For Citi Visa Gold, the minimum
income accepted is RON2,000.

Another services attached to Citi Card Visa is
the Equal Payment Plan, offering the possibility of reimbursing the
amount of money in equal installments with a lower annual interest
rate.

Citi’s entry into the Romanian market follows
its June 2007 announcement that it was considering launching
contactless cards into the market, another sign of the growth
potential Romania offers.