Edcon and Standard Bank team up to offer South Africa first no fee credit card
22 August 2005
Edcon has teamed up with Standard Bank to offer qualifying Edcon store-card clients a MasterCard, the first credit card available in South Africa to carry no annual fee.
The Edcon-Standard Bank partnership will provide a credit card to Edcon's customers with a proven credit track record and who therefore represent a low credit risk. Edcon currently has over 3,8 million store-card customers, 86% of whom are current and able-to-buy.
"We are pleased to be able to extend our service offering to our customers with a strong record of managing their finances, but who currently have not obtained a credit card through normal banking channels," said Ian Wood, Financial Services Executive for Edcon.
"Our research shows that of the existing Edcon account holders, approximately 68% do not currently own a bank credit card. Many of these people mistakenly believe they would not qualify."
Barry Fergus, a Divisional Managing Director of Credit Cards at Standard Bank, said the Edcon customer base was extremely attractive to Standard Bank.
"We will be able to apply our world class value management model which looks beyond just risk minimisation to focus more broadly on achieving a balance between short term returns and long term value.
"Our risk and reward techniques provide exciting new opportunities through this new credit portfolio," Fergus said. Prior to joining Standard Bank Barry Fergus was Managing Director of Barclaycard International, running credit card businesses in over 60 countries.
"We are looking forward to working with MasterCard to allow more South Africans the convenience of using their new card at any store or business displaying the MasterCard logo, currently 23 million points of representation worldwide," Fergus said.
Edcon and Standard Bank will share in the profits from the credit card, which is expected to be cash positive within 12 months. Standard Bank will be responsible for the credit granting criteria.
Invitations to take up the credit card will be rolled out over coming months to current Edcon store-card holders whose accounts have been well managed for at least six months. Qualifying Edgars customers will receive their credit card offers from August and Jet customers will receive theirs later in the year.
The new credit cards will be either Edgars or Jet branded to capitalise on the existing strong brand loyalty and awareness that these brands have in the market. In the latest Markinor Top Brands Survey Jet was ranked number one apparel retail brand and Edgars rated number two.
"These cards provide a unique value proposition for all Edcon customers but we anticipate that the fee free element will have special appeal to lower and middle income customers, Fergus said.
The Edcon credit cards will have no annual fees, up to 55 days interest free credit on balances paid in full no fees on administration support such as access to internet banking or statement copies and no lost card replacement fees. ,.
"The only fee that will apply will be for customers exceeding their pre-agreed credit limit. We do not believe good account holders should subsidise bad customers," Fergus said.
Ian Wood said, "Edcon has a strong track record of identifying opportunities to provide our customers with cost-effective value-adding services to expand market share across all our chains, for example our insurance products and personal loans."
The new credit cards will operate independently of existing Edgars and Jet store-cards and Clubs. They will enable consumers to pay for goods and services at stores and vendors outside the Edcon network.
Wood explained that international research and local testing has shown that offering co-branded credit cards increases brand loyalty and does not affect the sales, profitability, or performance of the retailer co-branding the cards. In some instances, in-store sales actually rise.
Fergus concluded by saying, "Standard Bank has a track record of identifying innovative ways to lower barriers of entry and leveraging popular brands to attract new customers. We are confident this partnership with Edcon will deliver benefits to consumers as well to the two business partners in this venture."