While American Express has been the preferred credit card option for affluent customers in Asia Pacific, players such as Mastercard and local banks have also started to focus on this profitable segment.
According to our Credit Card Customer Analytics, loyalty points and rewards account for just over 9% of the factors driving choice of credit card in 2015/16 globally. Air miles and airline benefits make up the majority of these rewards.
Canada reported the highest share of consumers for whom air miles and airline rewards are important factors behind choice of credit card (16.6%), but Hong Kong and New Zealand were ranked the highest among Asia Pacific countries.
These figures show that Asia Pacific is an important region for credit card providers to target consumers through rewards, due to a growing affluent segment that is becoming increasingly influential within the global commerce environment. Mastercard estimates that by 2020, Asia Pacific will have the largest population of high net worth individuals, with an expected annual growth rate of 10.3% in 2017.
Hong Kong has traditionally provided a strong commercial incentive for credit card providers to expand their business in the region, due to its favorable demographics and significant growth in the number of wealthy individuals. This is confirmed by our Credit Card Customer Analytics, which shows that 15.6% of Hong Kong consumers selected air miles or airline rewards as a reason for credit card choice, more than double the global average (6.7%). New Zealand, Australia, and Singapore also have proportions above the global trend.
While American Express has been one of the most widely held card schemes among high net worth individuals, competition has recently intensified in Asia Pacific. Mastercard has redefined its affluent benefits strategy in Asia Pacific with a wide range of benefits available for Mastercard Platinum, World, and World Elite card holders across the following pillars: Travel, Dining, and Peace of Mind, its complimentary e-commerce and wallet insurance offering.
American Express is also facing fierce competition not only from Mastercard, but also from local and international banks. In order to effectively compete with these players in Asia Pacific, Mastercard needs to focus its efforts on Hong Kong as the most promising market, due to its affluent population. However, it must also extend its influence in markets with a significant potential for growth in credit cards for the affluent (e.g. New Zealand, Singapore, and China). Partnering with merchants that serve this segment should constitute an important part of Mastercard’s strategy in Asia Pacific.
By Nicolae Bacila, Consumer Payments Analyst