Although decreasing choice locally, consolidation and change in the Spanish savings bank market will increase competition nationally, as cajas merge together. These larger Spanish issuers are competing in greater numbers across many regions and will provide more advanced and innovative products with better rates for payment cardholders, although consumers may be slow to take up the new offerings.
In 2007, the Spanish payment card market was one of the most fragmented in Europe, with 45 cajas, or savings banks, operating regionally throughout Spain. However, an ultimatum was issued to the cajas in late 2010 that forced them to either merge or become conventional commercial banks and seek stock market listings, or otherwise face nationalization. Mergers undertaken in response to this ultimatum have led to a fall in the number of cajas to just 17, with many expecting this trend to continue until just six or seven cajas remain. Although this represents a fall in the number of competitors, Spanish card consumers will no longer be faced with the stark choice between a small local caja and a nationwide commercial bank. Instead, there will be a greater number of larger Spanish issuers competing across all regions, and large commercial banks such as Santander and Banco Bilbao Vizcaya Argentaria (BBVA) will face more effective competition in each of Spain's 17 autonomous communities.
With access to cheaper capital and economies of scale, while also maintaining local expertise, merged cajas and new commercial banks will provide more advanced and innovative products with better rates for payment card consumers. However, with Datamonitor's research indicating that the large majority of Spanish cardholders are unlikely to change credit cards in the short term, the market can expect to see a delay in widespread consumer uptake.
The imposition of the new ultimatum means that those banks which fail to attract private investment will be taken over by the state-backed restructuring fund, the Fondo de Reestructuración Ordenada Bancaria (FROB). Two cajas, CajaSur and Caja Castilla La Mancha (CCM), have already been nationalized as part of a national program to put the cajas on a firm financial basis.
The effects of the regulation have had, and will continue to have, a major impact on the payment card issuing landscape, as the new merged entities evolve differently. Although on average three cajas have merged to form each new entity, in some instances this number has been much higher. Caja Madrid, with a market share of 7%, and six smaller Spanish savings banks pooled all their retail banking and payment card businesses in a new joint company called Banco Financiero y de Ahorros (BFA), which is Spain's biggest domestic retail bank. Caja Madrid and its partners, including Bancaja, with a 2% market share, and savings banks from the Canaries and Rioja, will each manage business in their own geographical areas, thereby maintaining local expertise.
La Caixa, Spain's largest caja with a market share of 11%, has also been changing rapidly, although using a different approach to Caja Madrid. After its acquisition of Girona, La Caixa transferred its payment cards business to CaixaBank, a new entity fully owned by La Caixa. CaixaBank is to list on the stock market and should become a well-capitalized and publicly listed new entity with the ability to acquire additional, weaker cajas.
However, large cajas such as La Caixa and Caja Madrid are not the only likely consolidators. Listed banks such as Banco Sabadell, BBVA, and Banco Popular are likely to make acquisitions in regions where they need to expand their footprints.
The consequences for the payment card market are clear. Before the consolidation, only La Caixa and Caja de Madrid operated significantly outside their respective autonomous communities. Other cajas were far smaller in their operations and had only regional influence. Therefore, commercial banks only competed with smaller cajas when operating in their localities. However, the scale of the subsequent merged cajas and the new commercial banks mean that competition will be more national with more entities competing in every region, utilizing the infrastructure of the merged savings banks. This means that the market share of payment card issuers is likely to become more polarized with a smaller number of players accounting for greater market share. Although competition usually decreases when a market consolidates, the economies of scale through the merging of back office functions and more direct competition with other national players are likely to bring better products with more competitive rates to payment card consumers throughout Spain.
However, Datamonitor's own consumer research suggests that 88% of Spanish credit card holders are satisfied with their existing products and are unlikely to change. Therefore, the market can expect to see a delay between the launch of more advanced and innovative products resulting from mergers and consumer uptake.