Banks Line Up To Win Favour As Preferred Djs Card Provider
The Age
Wednesday December 27, 2006
ELEVEN banks, including four global giants, are preparing to strut their stuff in a beauty parade at David Jones as they vie to help run the chain's new general-purpose credit card.
The aspirants include the Big Four: Commonwealth Bank, Westpac, National Australia Bank and ANZ. There are also three second-tier operators - St George, BankWest and Macquarie - plus international heavyweights HSBC, Citibank, GE and American Express. A 100-page document detailing the proposal went out earlier this month under strict confidentiality. The banks have until January 31 to respond. DJs is anxious to make the right decision because it hopes to profit from developing its financial services business. The retailer makes nearly a third of its revenue from its card. It was the first to offer such a service to customers in the 1960s. In the past financial year, consolidated interest revenue on its card was worth nearly $48 million, and financial services fees worth more than $21 million. DJs profits by charging higher rates to customers than it pays to borrow the money on the wholesale market. It can either go solo to launch the card or partner with a financial institution. If it decides to take on a partner, it will launch a second-round bidding process with credit card providers Visa, Mastercard and Amex in the second half of 2007. Either way, the cards should be available by late 2008.DJs could also choose to offer other products such as loans and insurance, as has British supermarket giant Tesco. DJs chief executive Mark McInnes said the company was treading carefully because consumer credit was outside its core area of expertise. "We have researched the international and Australian markets thoroughly, and we are well armed to begin those discussions," Mr McInnes said earlier this month. If David Jones decides to go it alone, it will have to meet the Australian Prudential Regulation Authority's capital ratio requirements, which can be a drag on its return on equity. It will also need to apply to APRA to become a "specialist credit card institution".
© 2006 The Age
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