Virgin launches South African loyalty credit card
Bearing a number of features that are expected to shake up the local market, Virgin Money has launched its credit card offering in South Africa. The innovative Virgin Money Credit Card even offers 5% interest on positive balances.
The credit card combines no annual fees, no loyalty fees, and an interest rate of 0% for the first three months, with a 15.75% interest rate after that. With the typical Virgin innovative twist, the card also earns cardholders a fixed 5% interest rate on any positive balance, no matter how big or small.
VIP loyalty programme The credit card was developed following extensive research into what South African consumers really want from a credit card. According to Maxwell, “Our loyalty programme, Virgin Money VIP, is free. It offers a ‘backstage pass’ to the world of Virgin with discounts at Virgin Active, Virgin Atlantic, Virgin Cosmetics, Virgin Limited Edition and Virgin Mobile.”
As part of the VIP loyalty programme, many Virgin brands offer cardholders instant discounts, as the following examples show:· Virgin Active: 10% off monthly rates· Virgin Atlantic: 10% off any fare· Virgin Cosmetics: 5% off· Virgin Mobile: 10% off handsets· Virgin Ulusabi: 10% off accommodation
The company also announced the first three ‘red carpet retailers’ to join the Virgin Money VIP loyalty programme: Levi’s, Primi Piatti and Red Envelope Adventures. These retailers are offering Virgin Money credit cardholders discounts of between 10% and 15%.
All Virgin Money Credit Card customers also have the automatic opportunity to win exclusive Virgin rewards and experiences. For example, every credit card approval during July 2006 will automatically be entered into a competition for the cardholder and three friends to take an all-expenses paid trip to the V-Fest music festival in the UK in August 2006.
End end to high fees According to Virgin Money, South African banks charge credit cardholders a combined total of some R1.5 billion each year in account charges and complex fee structures. Virgin founder Sir Richard Branson said: “South African consumers have long been made to feel grateful just to be offered a credit card by their bank, and it is high time customers are given a better deal.”
The figure of R1.5 billion (approx. US$0.2 billion) was derived from Virgin Money’s research, and is based on a conservative estimate of 6 million credit cards in South Africa, an average annual fee of R138 (approx. US$19.50) per year, and an average annual reward/loyalty fee of R116 per year (e.g. fees for associating a credit card with a frequent flyer mileage account).
Transparency and simplicity John Maxwell, managing director for Virgin Money South Africa, explained that the new credit card offering was designed to provide absolute transparency in fees: “The average South African credit card has up to 25 different charges, while Virgin Money has only eight… We have no Platinum, Gold or Silver cards. Everyone gets our best rates, our lowest charges, no hidden extras, and the same service, no matter what their credit limit.”
Maxwell also promised that Virgin Money’s low fees were not just a launch ‘gimmick’. The fees associated with the card are as follows:· Garage Card transactions – R3.25;· ATM withdrawals, worldwide – R8.75;· ATM cash deposits (ABSA only) – R15.00;· Cash withdrawals and deposits (ABSA branches only) – R30.00;· Lost card replacement, cheques and unpaid debit orders – R125.00.
Other consumer benefits The card comes with the consumer’s choice of three preset face designs (named Bling, Just Use Me, and Jive), as well as a free secondary card and a linked garage card (as credit cards themselves are not permitted for petrol purchases in South Africa). Apart from the VIP loyalty programme, other benefits associated with the card include lost card insurance, travel insurance, internet banking, ATM enquiries and statements.
What’s the market response? According to South African loyalty market expert Deon Olivier of Achievement Awards Group, “The target market will be the under-25 year-olds, as you have to earn at least R2,500 per month to qualify, and consumers in their late 30s and early 40s who still want to feel young and trendy. This is by far the freshest bank product we have seen in this country for the past five years.”
Olivier’s view is that the rest of the market will certainly have to respond to this gauntlet thrown down by Virgin Money.
Virgin Money launched in the UK in 1995, and in Australia in 2003, and already claims over 2 million customers between its credit cards, personal loans, home loans, cancer cover, insurance, pensions and saving accounts. As in the UK and Australia, the South African Virgin Money credit card is backed by MasterCard. Virgin Money South Africa is a joint venture between the Virgin Group and ABSA Bank Limited.