Alpen Bank Individual Homework

BA 627 - Alpen Bank Individual Homework

1. Describe the credit card market Alpen Bank is considering in terms of competitors and consumers. (20 pts)

Competitors:

Romanian banks had been marketing credit cards for several years already, but the actual usage rates of the cards were still pretty low since many merchants still accepted cash only.  Romanian Bank for Development was the biggest credit card issuer with 606,000 issued credit cards, while the utilization was only 27%.  Raifeissen Bank had the highest usage rate – 70% with 200,000 issued credit cards.  They are the main competitors among all Romanian banks, who have issued credit cards already, for Alpen Bank.  However, the overall credit card usage rate was low – only 20%.

Consumers:

In the early 2000s, the spending of Romanian consumers was mainly cash-based, and merchant acceptance of card payments was low.  Moreover, the Romanian consumers lacked experience in managing credit.  Based on the two reasons, the executive team of Alpen Bank believed that Romania lacked credit-card growth potential compared to other emerging markets.  However, with the rapid economic growth and rising incomes, particularly among the emerging middle and upper middle class, the total disposable income had significantly increased.   One-third of Romanian households are likely to purchased branded imports from the Europe as well as getting more and more interested in purchasing luxury goods, and thereby the number of consumers who are likely to use cards is dramatically increasing.  Even with rapid growth in financial cards, the market remained underpenetrated with only 1.2 cards per household that is the lowest among other central and eastern European countries.  In the contrast, the vast majority of cards in circulation are debit cards, but not credit cards, and many cardholders use their cards only for cash withdrawals rather than the purchases.

There are three potential customers: the most affluent, the affluent and the middle class.  The most potential customers are the most affluent who have net annually income of at least 6,000 euros.  The second is the affluent who have net annually income of 4,500 – 6,000 euros.  They both are active, career-oriented professionals who are increasingly conscious of their image and sought goods and services that match their status, and less price-sensitive about annual fees and more likely to be experienced with low levels of consumer debt and to use their cards with greater frequency.  The third potential credit card customer is the middle class who have net annual income of 3,000 – 4,500 euros.  They are a mix of young professionals and families that value quality, but are more willing to compromise and make price-driven decisions.  Many of them are interested in having credit cares, but the actual card utilization is very low.