Rogers Communications Inc. (TSX:
RCI.B) has announced that it has been granted approval to begin offering its
own credit card by the Office of the Superintendent of Financial Institutions.
Rogers hopes to begin offering this credit card to consumers within the next
year.
From its own website, Rogers has
announced that the final step in the application process has been completed and
that those who use this credit card will earn themselves rewards points. Since
earning points with Rogers will strengthen the link between the company and its
customers, this may be viewed as a move to encourage customer retention.
In 2011, I first wrote about Rogers entering financial services and at the time I pointed out the risk that Rogers
would stray from its core offering into uncharted waters. Time will tell
whether Rogers is able to navigate the financial landscape profitably and avoid
attracting only high-risk customers to its credit products.
I have been viewing the reaction
of individuals on the various media postings of this announcement. The public
perception and most highly “liked” comments are those that view this move by
Rogers as “one more opportunity to rip off consumers”. I find this interesting
given the fact that this credit offering is something that a person would need
to apply for in order to opt in to it. While I cannot see myself getting one of
these credit cards, I think that “more choice” is better for consumers – to each
their own, is my view.
Should the addition of a credit
card to Rogers’ portfolio prove successful, this will be one more stream of
earnings to bolster dividend increases down the road for shareholders. I will
be watching closely over the next few years to see how many customers Rogers is
able to add and how accretive this will be to earnings. Competition from the
already strong Canadian banking sector and other retailers will make this a
challenging proposition.
The key to everything will be
building a base of quality customers on a large enough scale to make this
worthwhile. If this succeeds, I will look for similar moves from Bell Canada
(TSX: BCE) and Telus (TSX: T) as well.
Full disclosure: Long BCE. No
position in RCI.B or T and no intention to initiate one within the next 72
hours.
