BMW (MW last week) and Audi are the latest car companies to move into mainstream financial services, with the launch of branded credit cards. Given the difficulties facing the car industry, financial services is becoming increasingly attractive to manufacturers looking for new revenue streams.
BMW is introducing credit cards, insurance and savings products following the success of similar offerings in markets such as the US and Australia. Audi is also gearing up to launch its own credit card, while other manufacturers – among them DaimlerChrysler (which has Mercedes, Chrysler and Jeep-branded credit cards) and Porsche – already offer various financial products.
Almost all the major players in the car industry have financial services arms offering finance plans for people buying cars at dealerships. But only a handful actually provide mainstream products, and these are generally the more aspirational and iconic brands.
BMW has teamed up with American Express to launch co-branded BMW and Mini credit cards. It has also joined forces with Newcastle Building Society to offer branded savings and bonds products, and will provide home insurance through UK Insurance, part of the Royal Bank of Scotland.
BMW Financial Services (GB) chief executive Keith Dye says the aim is to give BMW’s 1.5 million UK customers special incentives to take out financial services products. These will include test-driving new models before they are officially available. A key aim is to help BMW gain more information on its customer base.
Corporate Edge chairman Chris Wood says it is a sensible move. “If you can hook people into a card that gives them discounts, not only will it make them more likely to buy your cars but you also have more chances to talk to them,” he explains.
Porsche launched a credit card earlier this year in association with Mastercard and has so far signed up 1,700 customers. Brand communications and strategy manager Wayne Darley says the majority of those are 911 owners as they tend to be particularly passionate about the brand.
“Porsche is very much an enthusiast brand,” he adds. “There are 13,000 members of its clubs in the UK, so there is a huge fraternity of enthusiasts out there. We have a clothing line and other Porsche merchandise and the credit card is just a natural extension of that.”
Of the more mass-market brands, only Renault offers any sort of mainstream financial services product – in the form of home loans – beyond dealership credit agreements. Peugeot had a credit card in the UK but scrapped it five years ago when it set up its own financial services division. CitroÃ«n offers a credit card in France but a spokesman for CitroÃ«n UK says it “wouldn’t be appropriate for this market”.
It seems brands most likely to succeed in the highly competitive financial services market are the ones that people are most passionate about, which is why so many football teams are launching their own branded cards.
But Wood thinks other mass-market car marques could follow BMW’s and Audi’s lead. “I think we’ll see manufacturers with less prestige trying to do it, but they will probably have to give more away to make it work,” he says. “If they can’t persuade people to do it on brand grounds, they will have to find other ways to make them use their card.”