Consumer preferences in the Turkish credit card market

Abstract

This thesis unveils the preferences of consumers in the Turkish credit card market. By using the data obtained from a nationwide credit card consumer survey and employing a multinomial pro bit analysis, the factors that affect individuals' credit card choices are identified. It is observed that different types of consumers have different preferences for credit card attributes. Conversely, different types of banks adopt different strategies to attract different types of consumers. Discovering consumers' preferences in this market is valuable for both regulators and bankers. Regulators can design more effective and efficient regulations to improve the welfare of consumers and bankers can develop better strategies to attract new customers and to satisfy the existing ones. It is possible to conclude that non-price competition prevails in the Turkish credit card market. Banks obtain market power through bundling and product differentiation. Although they charge relatively higher prices, large private banks, which are market leaders, acquire their market shares by offering both bank level and card level non-price benefits to their customers. Medium and small banks outperform by offering better installment opportunities, attract risky revolvers, and benefit from word-of-mouth marketing. Public banks have loyal customer bases, also benefit from their bank level characteristics, and are preferred on the basis of low interest rates. Participation banks are preferred on the basis low prices, both interest rates and annual fees, and are avoided on the basis of both bank level and card level non-price benefits.