Banking in Canada moved one step closer to computerized nirvana last week with the arrival of credit cards at a trust company, followed by the announcement that they will also soon be widely offered by credit unions as well. Finally breaking into the realm that was the exclusive territory of the chartered banks, these two “near banks” made the decision to enter the plastic game, explains George May, head of the Canadian Co-operative Credit Society Ltd.—traditionally the very embodiment of thrift—based on surveys of members’ needs and "the growing convenience provided by these cards.”
It wasn’t an overnight decision. For Canada Trust, a subsidiary of Canada Trustco Ltd. of London, Ontario, one of Canada’s largest trust companies, negotiations had been going on since 1972, and last week’s arrival of Master Charge at the company’s 159 branches culminated months of careful
marketing strategy mapped out by VicePresident Sean McNamara. The first of the trust companies to enter the field, Canada Trusi is offering free giveaway leather wallets (30,000 have already been ordered), five special draws, with those using their cards eligible to win a new Cadillac, and— most astonishing of all—a 14.4-per-cent interest rate (compared to the usual 18 per cent) until the end of 1980. Scarcely able to conceal his conservative banker's distaste for Canada Trust’s promotional razzmatazz, AI Bates, vice-president of the Bank of Montreal, criticizes CT’S discount. “It’s not a wise move economically on anybody’s part in an escalating environment,” he sniffs. “It leads to a misunderstanding in the marketplace regarding the cost of money.” Even Bruce Simmonds, vice-president of Interbank, international co-ordinator for Master Charge in New York, says Canada Trust’s tactics are "exceptional and quite unusual.” While not disclosing the fee it paid to the Bank of Montreal and the Provincial in order to enter the credit card program, Canada Trust admits that expense, plus the cost of underwriting the lower interest rate, will result initially in
losses. “It’s part of the marketing price we’re paying to get into business,” says McNamara.
Canada Trust competitors Victoria and Grey Trust and Municipal Savings & Loan will also be announcing deals with Master Charge but, like the credit unions, it will be nearly a year before the other trust companies will be ready. Big winner in the latest round of card sign-ups is Master Charge, which, so far, has left rival Visa in the dust, likely changing the stakes between the two cards in Canada. Though they have almost the same number of members worldwide, Master Charge in Canada—offered only by the Bank of Montreal and Provincial Bank—traditionally lagged far behind, with only 2.2 million cardholders compared with Visa’s seven million. While May, of the credit union association, says this spread gives Master Charge greater scope for expansion, other insiders point out that Master Charge is simply offering better deals. And when there's money to be made, that’s what the banks, trust companies and credit unions are there for
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