Bank of America recently published a breakdown of its credit card production by channel, in its second quarter 2011 Investor Fact Book.
Comparing the first half of 2011 with the full-year 2010, we see that eCommerce remains the most important credit card acquisition channel (at just over 28%), but its share fell almost 8 percentage points between 2010 and the first half of 2011.
Channels that have had the strongest share gain are:
- Branch: Bank of America was at the forefront of the push among leading bank card issuers to sell cards through their branches in the mid 2000’s, but this trend appeared to have lost traction in more recent years, as the financial crisis took hold. However, there was a notable shift in the first half of this year, with branches accounting for 28% of credit card production, up more than 7 percentage points from 2010.
- Direct mail: Traditionally, direct mail accounted for an overwhelming share of credit card production. However, this share plummeted over the past decade, as response rates fell and new channels emerged with lower average acquisition costs. However, this decline appears to have bottomed out, with bank card issuers now rolling out targeted direct mail campaigns to specific segments of interest, such as affluents. DM accounted for 24% of card production in the first half of 2011, up 3.5 percentage points from 2010.
Google and its partners (Sprint, MasterCard, Citi and First Data) officially launched the Google Wallet mobile payments app yesterday.
At the same time, Google licensed Visa’s PayWave contactless payment technology. And both American Express and Discover signed on as Google partners. With these companies now on board, Google is starting to build a strong partner ecosystem. In so doing, Google Wallet competing with other emerging mobile payment systems (such as Visa’s own Digital Wallet as well as the Isis consortium), in getting the strong array of partners in place.
Building a partner ecosystem will certainly help to strengthen the various mobile payment offerings. However, the emerging mobile payments sector will need to overcome a range of key hurdles in the coming years. Two of the most significant hurdles are:
- Merchant acceptance: only a very small percentage of merchant payment terminals can currently process mobile paymment transactions. Mobile payment providers will need to focus initially on spend categories and merchants that are most amenable to mobile payments, and over time expand to other merchant categories.
- Consumer adoption: Cash and cards are established and relatively convenient forms of payment, and will be very difficult to dislodge. Mobile payment providers will need to build awareness of mobile payments as a spending category, and communicate mobile payments’ key advantages over establish payment methods (e.g., speed, convenience, as well as the ability to receive special offers at the point of sale). In addition to marketing the categories, individual mobile payment providers will also have to differentiate their own offering from direct competitors.
With these hurdles in mind, it is notable that American Banker this week quoted a MasterCard executive as referring to Google Wallet as a “five-to-ten year effort, not a one-year effort.”
Flickers of growth focus in a landscape of darkness for Bank of America, with news release that they are hiring 180 Merrill Edge Financial Solutions Advisors (FSAs) throughout New Jersey in 2010, presaging doubling of FSA’s by next year to more than 1000 nationwide. Like many banks, focus is on mass affluent, and BofA claims to serve more than 8 million of these. Big investments in data mining to dig the gold in that big mountain range. New product and service investments too, with Platinum Privileges, which rewards customers with $50k+ in deposits with xxx, new mobile app, and even specialty stores for aristocratic Main Street presence integrating investment, small biz and mortgage specialist.