Competition in the Credit Card market

gd2000 said:
the market isn't competitive/is highly concentrated.
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Can you explain that in layman's terms?
Inertia can make a market extremely uncompetitive (IMO that's the largest reason for lack of competition in Ireland)
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I would agree that inertia is a problem in this and many other consumer contexts alright. In many cases consumers themselves fail to exercise what power they have to get the best deal - whether it be finding the cheapest sliced pan or the best credit card etc.
 
CCOVICH said:
How did MBNA do it?
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MBNA is a large international banking group - and it is relatively easy for such a group to get a banking license under current legislation.

True competition will only happen if indigineous (Ryanair-style) companies can develop and enter the banking market. The Irish process of obtaining a banking license for such a company is such that it will never happen. The process does not allow for a single wealthy individual, or a small group of wealthy individuals to do so - and if you examine how successful competitive Irish companies have been developed, it is always by such an individual or small group. So sadly, we are doomed to continue with the present lot, or new foreign entrants who have all of the characteristics of the present lot.
 
I don't understand the doom and gloom portrayed in the previous post. We have a situation today where customers can not only easily get transaction free current account banking but can even receive interest on current account balances in some cases. There are deposit rates on offer that are above mortgage rates and in line with or exceeding inflation. Relative newcomers to the mortgage and general banking markets in recent years have obviously stimulated competition and the consumer has benefited (at least those who don't let inertia stop them from shopping for the best deals). How is this not a "good thing"?

Wouldn't Anglo Irish Bank be an example of a dynamic new small entrant into the market in recent years?
 
Gulliver said:
MBNA is a large international banking group - and it is relatively easy for such a group to get a banking license under current legislation.

True competition will only happen if indigineous (Ryanair-style) companies can develop and enter the banking market. The Irish process of obtaining a banking license for such a company is such that it will never happen. The process does not allow for a single wealthy individual, or a small group of wealthy individuals to do so - and if you examine how successful competitive Irish companies have been developed, it is always by such an individual or small group. So sadly, we are doomed to continue with the present lot, or new foreign entrants who have all of the characteristics of the present lot.
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Are there Ryanair type operators offering credit cards without the backing of major banks in other countries? Surely banking/offering credit should be subject to a more stringent licencing process than a simple widget manufacturer?

Would Mastercard and Visa want to deal with such operators? Would they do so on terms that make it viable?

Anyway, do we want credit card rates so low that they encourage reckless use of cards?
 
Mary o Dea's comment re card market competition were off the mark. Competition equals lots of rates - if they all had the same rate then would we need to be worried.

Our education system is however very narrow with very little education on items like mortgages, loans and pensions which have significant impacts in later life. These sectors also have "buzz" words which can be intimidating to non financial people. We needs lots of education on this in school time.
The government has been complicit in this - look at the complexity surrounding pensions / PRSI contributions etc. - drive the population into the hands of the "experts"


A further point to note is that the financial sector is good at categorising people in terms of these peoples knowledge and position in society. Hence the doctor will be offered better terms and there will be less pressure to take the "lose your job" insurance while other occupations will be led to higher rates, lower terms and far more hard selling on items like insurance.
 
For example, to qualify for AIB's lowest interest rate credit card (the Platinum Card), you have to be earning at least €50,000 per annum. This also entitles you to certain rewards etc.
 
But why would a doctor get preferential terms because of his/her profession if that's what the poster was insinuating?
 
Surely it's a legimate example? They could have said accountant, architecht, barrister.........
 
CCOVICH said:
Anyway, do we want credit card rates so low that they encourage reckless use of cards?
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CCOVICH, have you lost the plot entirely. Do you really need high rates to protect you from your instincts. Why not also increase the price of food, energy, and all of the necessities of life? Why not also increase taxes. Then you might spend less!!
 
Gulliver said:
CCOVICH, have you lost the plot entirely. Do you really need high rates to protect you from your instincts. Why not also increase the price of food, energy, and all of the necessities of life? Why not also increase taxes. Then you might spend less!!
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You mean like adding tax on fags, drink and petrol etc?
 
Gulliver said:
CCOVICH, have you lost the plot entirely. Do you really need high rates to protect you from your instincts. Why not also increase the price of food, energy, and all of the necessities of life? Why not also increase taxes. Then you might spend less!!
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Since when is a credit card and the ability to build up debt a necessity?

Do you disagree with the notion that interest rates should not be so low as to encourage high levels of personal debt?

How do you feel about the ECB and their actions in the past 2 years? Have they lost the plot as well?

And can you please get back to your earlier point about barriers to entry etc. in the Irish credit card market. Are we any different from most other countries, e.g. the UK, where there are a similar number of operators offer cards and at rates that are comparable to Ireland?

Do you have any ecomonic or empirical analysis to support your opinions or are they just that?

I'm sure there are similar barriers to entry with respect to provision of insurance and funds etc. yet the likes of Sean Quinn and FBD seem to have done ok.
 
ClubMan said:
If that's what it was then fair enough. It's not clear from the original post.
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I think the other half of the point was doctors and other professionals would not be pressurised to buy insurance against losing their jobs because they are highly unlikely to be unemployed.
 
As one of the 50% who clears his CC debt each month, there is no incentive for me to switch from my current provider (BoI). Having looked around a while ago, the only card that was attractive to me was the Tesco one (clubcard points on spending), but I was refused it because I have no credit history (I've never been in debt!).

So could the regulator be saying that the market is uncompetitive because few of the card providers are offering an incentive to switch? (i.e. they are not actively trying to get 50% of the market to switch cards).
 
Apart from the interest rate charged (which ideally should be academic to people if they clear their balances before interest applies) there are other features/charges that many people don't bother checking or shopping around for the best deal on - e.g. incentives such as those mentioned in the previous post, forex margins on non € transactions - a 0.9% difference between some cards, length of credit periods, cash advance and/or withdrawal fees etc. See the IFSRA cost survey for more. This survey alone surely suggests that there is competition in this market?

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CCOVICH said:
Since when is a credit card and the ability to build up debt a necessity?

Do you disagree with the notion that interest rates should not be so low as to encourage high levels of personal debt?
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CCOVICH, this is an outrageous viewpoint...morality and people's self discipline should have nothing to do with setting interest rate levels. That's Thought Police stuff.
 
CCOVICH said:
Surely it's a legimate example? They could have said accountant, architecht, barrister.........
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yes - this is what I mean.

On two levels

1. these are less likely to be unemployed etc better salaries etc

2. As these folks then to be more financially savvy bank employees will not in my opinion hard sell to them as they would to joe bloggs. Bank employees will be more inclined to accept their position and do less herding of client towards a high margin product.

Banks have all sorts of bonuses for sales - this mean bank staff have to make sales of high margin and a number of them will go higher pressure more often on the average joe / mary in my opinion.
 
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