Unprecedented Activity in Canadian Card Market
It’s not just the level of card-related activity in Canada that has caught our attention, but the type of activity. As outlined in the punch list below, the activity ranges from interchange developments to a flurry of moves in the card partnership space, many of which are highly unique.
- Credit Card Interchange Regulation: On November 4, 2014, Visa and MasterCard voluntarily agreed to limit interchange in Canada. The underlying mechanics and tactics of how each network will effect this change differ. For a more complete perspective on this topic, please reference A Closer Look at Visa’s and MasterCard’s Voluntary Agreement to Interchange Limits in Canada.
- Sears Canada and Chase Announce End of Partnership: In November 2014, Sears Canada and Chase announced the pending termination of their credit card partnership. In what amounts to a pre-packaged divorce, there are specific dates and processes associated with the termination. Stay tuned over the next few months.
- Target to Exit Canada: In January 2015, Target announced its intent to close all of its Canadian stores and exit Canada under bankruptcy protection. It remains to be seen how the RBC Target MasterCard credit card accounts will be treated during and after the wind-down.
- Best Buy Transitions Card Program to Desjardins: Another prior Chase client in Canada, Best Buy, struck a new partnership arrangement with Desjardins in January 2015. This deal included the transition of the private label accounts of the previous Chase program to Desjardins, including both the Best Buy and the Future Shop private label credit cards. Existing co-branded Best Buy Reward Zone Visa cards, which are not included in the transaction, will be deactivated as of February 2015.
- Costco Canada Launches Co-Brand MasterCard with Capital One Canada: On October 1, 2014, Costco Canada, Capital One, and MasterCard launched a co-brand credit card as a successor to the American Express co-brand card. Unlike most retail partnerships, the Costco Canada decision involved card acceptance as well, where MasterCard gained exclusive acceptance rights as of January 1, 2015. American Express has attempted to convert cardholders from the legacy Costco True Earnings card (which deactivated as of January 1) to the newly-launched Amex SimplyCash card.
- Tim Hortons and CIBC Launch: Tim Hortons partnered with CIBC to launch the “Double Double” Visa rewards credit card in July 2014. This no annual fee card allows customers to earn Timmy Rewards points on all spend, and features an innovative light-up button that allows customers to pay using either their Visa account or by redeeming loyalty points for products at Tim Hortons.
- Canadian Tire’s Partnership with Scotiabank: This particular deal grabbed our attention given how unique it is compared to other retail partnerships. In May 2014, Scotia made an equity investment in Canadian Tire Financial Services, agreed to provide a $2.25 billion funding commitment, and the parties agreed to pursue a range of marketing opportunities.
- Aimia Strikes Unique Card Deal: Aeroplan is the largest co-brand program in Canada (measured by purchase volume), with a prior relationship with CIBC dated back to 1991. When TD emerged as the new primary issuer for the Aeroplan program in September 2013, it was not a typical transition. CIBC sold approx. 50% of the Aeroplan portfolio (550,000 accounts representing $19B in purchase volume and $3.3B in receivables) and retained accounts with a strong overlapping banking relationship. Aimia, which owns and operates the Aeroplan program, now offers credit cards through three issuers (CIBC, TD, and American Express).
Sources: Company press releases and websites; the Wall Street Journal; Bloomberg; the Canadian Press.
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