Credit Card Lines for Leading Issuers Highlights Continued Deleveraging

Recent regulatory filings from some of the leading U.S. credit card issuers reveal ongoing declines in available credit card lines.

Although the three issuers in the above table all reported credit card line reductions between March 31, 2011 and March 31, 2012, there are some variations among these issuers.

  • Chase’s credit card lines fell 6% during this period, but rose in the two most recent quarters, increasing 1% between the end of 2011 and the end of 1Q12.
  • Citigroup is the only issuer among the three to report U.S.-only credit card lines, which fell 8% between 1Q11 and 1Q12.  However, like Chase, this decline appears to have bottomed out, with virtually no change in the most recent quarter.
  • Bank of America reported the strongest decline among the leading issuers, falling 11% between 1Q11 and 1Q12.  This represents a continuation of a process of retrenchment that has been in place since the start of the financial crisis.  Between end-2008 and end-2011, Bank of America’s credit cards lines fell by 46%.  There are some signs that this decline is tailing off, with a fall of only 1.7% in the most recent quarter.

Indications that the significant reductions in credit card lines are bottoming out provide evidence to support industry expectations that card outstandings will grow slightly in 2012.

Card Networks Report Robust Purchase Volume Growth

With MasterCard and Visa reporting quarterly financials in recent days, we now have a fuller picture of purchase volume trends for the main U.S. card networks.  Each reported relatively strong year-on-year growth in U.S. card spending, led by MasterCard (+13%) and American Express (+12%).

It is notable that Visa and MasterCard are following different paths in growing purchase volume.  Visa, which has been the dominant debit card issuer, is reporting continued slower growth in debit card purchase volume.  This is due to some debit card portfolios switching to MasterCard, as well as the impact of the Durbin Amendment, and has resulted in Visa’s credit card growth outstripping its debit card growth for the past three quarters.

In contrast, MasterCard has reported accelerating U.S. debit card purchase volume growth.  Credit card volume growth has also accelerated, but continues to trail debit card volume.

American Express has consistently recorded double-digit volume growth as it follows its spend-centric approach.  Discover also reported strong growth in 2011, but this has trailed off in recent quarters.

During this period of strong purchase volume growth for both credit cards and debit cards, credit card outstandings have continued to decline, emphasizing the transition in the credit card sector from a lend-centric to spend-centric orientation.  Many leading U.S. credit card issuers are expecting outstandings to grow slightly in the coming quarters, but it is probable that purchase volume growth will continue to outstrip loan growth for the foreseeable future.

Card volume growth should continue to be significantly higher than overall U.S. consumer spending growth, as consumers switch from cash and checks, with particular growth opportunities for cards in categories where they have traditionally had small shares of payment volumes.

In the longer term, card networks and issuers need to plan for new opportunities and challenges created by a changed payments landscape, characterized by demographic shifts, new payments technologies and changing shopping behavior.

The Vinaigrette Moment: Marketing and Sales Integration

Drip olive oil and vinegar onto a plate, and you end with little pools of each, unmixed, only really able to be enjoyed with some effort by manipulating your fork to get just the right amount of each to adhere onto the lettuce. However, if combine olive oil and vinegar in a receptacle and whisk them, you end up with a lovely blended vinaigrette. This description of basic salad dressing chemistry is a useful metaphor for bridging the divide between marketing and sales – a topic that was the subject of a panel in which I participated at the recent Tech Marketing Summit in Santa Clara.

Fundamentally, there is a lot about marketing and sales that is different:

  • Marketing tends to be more project (campaign) oriented while sales is more process (ongoing, repeated effort) oriented.
  • Testing and educational failure is (or should be) valued by marketing but is not really part of the sales lexicon.
  • And, most obviously, sales has revenue targets while marketing typically does not.

Oil and vinegar. But, with a little effort in the form of enabling technologies like integrated CRM/Marketing Automation systems, and some shared and defined objectives, the two can work separately but harmoniously to achieve good results.

Where things get really interesting, though, is when the two set aside their natural differences and really cooperate and collaborate. For example, if marketing interviews salespeople and finds that 15-20% of their time is spent creating presentations and doing customer research, there is a huge opportunity to give those sales people another 7-10 hours of sales time every week by creating presentation templates and a customer intel portal.  Likewise, if marketing and sales work together to analyze win/loss rates in certain segments, a picture can emerge of latent opportunities to pursue new markets or better allocate marketing investment to maximize the revenue opportunity. It’s only with this kind of collaboration that you get true go-to-market optimization.  And that’s the vinaigrette moment that produces real results.