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S E L E C T I N G M E D I A
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observers to the UK. A deal was struck with Advanta – who were already looking at moving
into the UK market – for a joint venture in the UK. RBS Advanta was born.
Advanta was one of four small mono-line card service companies operating with the
successful US business model that interested the Royal Bank of Scotland. In the USA, credit
bureaux supply data to credit card companies who use derived credit profiles to select
potential new customers. They offer introductory discounted credit account rates to attract
new customers from the regional banks. Prospective customers are targeted exclusively
with direct mail. The card companies have no strong brand in themselves, but are able to
sell their services on the strength of their MasterCard and Visa affiliations.
The deal was struck between Advanta and the Royal Bank of Scotland in 1995. Although
the US business model cannot be applied fully in the UK – we do not have the same
opportunities to access credit bureaux information in the UK (house rules apply, so that banks
are not allowed access to full consumer data) – the credit card usage profile of the UK was
somewhat similar to that of the US, albeit lagging three to four fours years behind in terms
of development.
Brand was key to the planned joint venture. Although smaller than the major high-street
banks, the Royal Bank of Scotland has a strong brand. A new company, RBS Advanta was
formed and launched in February 1996 as a specialist credit card marketer. Their new
approach threatened the traditional banking sector. UK-based credit card issuers have seen
their market share decline by about 4 per cent each year since 1994 when they completely
controlled the market. In the period 1996–98, US issuers such as MBNA and CapitalOne
took control of 15 per cent of the UK market, and since then several others such as Bank One
– who moved from start-up to being one of the three biggest users of direct mail in the UK
within eighteen months – have moved in and set up aggressive direct marketing,
sophisticated market segmentation, and risk analysis systems.
RBS Advanta has been a leading player in upsetting the ‘apple cart’. Even before the
new company started trading, their new approach provoked objections from an established
operator. A test mailing to 200,000 prospective customers in October 1995 included 15 ‘bullet
points’ that claimed to provide a direct comparison of product benefits and interest rates.
This included comparative information about the Barclaycard offering. Barclays Bank, in
seeking to defend against the new competition, took out a court action against RBS Advanta,
claiming infringement of the recently introduced UK Trade Mark Act (1994), in that the
Barclaycard trade name had been used without permission and in a derogatory way. The
court ruled that this was a case of ‘honest practices’ and that a reasonable reader would not
regard the particular use of the word ‘Barclaycard’ in the RBS Advanta advertising as
dishonest. However, certain items in the direct mail packs were held to be not comparing
like for like and it was highlighted that the pack made no reference to certain benefits which
Barclaycard offered and which the RBS Advanta card did not. Comparative advertising can
be problematic (as we discuss in chapter fourteen), but is ideal for use in established markets
where a big brand, or several brands, ‘own’ the market and ‘you’ as a smaller brand have
a demonstrably better product.
There are two categories of credit card customer: borrowers, who have debit balances
on their accounts and thus pay interest, and transactors who use their card simply in place
of cash. The RBS Advanta business model has been to attract only borrowers, through detailed
analysis of the type of card usage, and termination of inactive accounts. They even measured
the success of their direct marketing campaigns – not just by the number of new customers
attracted but also by the number of borrowers (immediately) attracted. But in the UK, the
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