Category Archives: Payments

U.S. Card Issuers: 3Q11 Spending and Lending Trends

An analysis of 3Q11 outstanding and volume data for leading U.S. credit card issuers reveals:

  • Signs of growth in outstandings. For the 11 issuers in the study
    • Four reported both year-on-year (y/y) and linked-quarter (q/q) growth in average credit card outstandings.
    • Five reported y/y declines, but q/q increases, indicating a recent transition to growth.
    • Two issuers had both y/y and q/q declines in outstandings.  One is Bank of America, whose high rates of decline are indicative of its particular challenges. The other is Capital One, but it is worth noting that its Domestic Card portfolio includes a run-off installment loan portfolio; excluding this portfolio, Capital One’s credit card outstandings are growing.

 

  • Continued strong volume growth (in this case, we just look at y/y growth for comparison purposes, due to the seasonal nature of spending):
    • Capital One has the strongest y/y growth, but this is part due to its acquisition of the Kohl’s private-label card portfolio.  Excluding this acquisition, Capital One still recorded double-digit volume growth.
    • American Express continues to report very strong volume growth in both consumer and small business spending (growth rate for the latter was 15%).

  • Volume growth rates continue to outstrip outstandings growth, and is indicative of a fundamental shift in the industry following the financial crisis, away from a lend-centric and towards a spend-centric model. This is seen in the persistently high APRs and relative scarcity of balance transfer introductory offers, but also in the very large bonus points/miles offers to drive both initial and ongoing card purchases.

Capital One launches a new small business credit card suite

Capital One recently launched Spark Business, a suite of six small business credit cards.  This represents a radical overhaul of the Capital One small business credit card portfolio, with the six new Spark Business cards replacing the existing five cards.

In launching Spark Business, Capital One is following the lead of Chase, which in 2009 replaced its small business card product range with the Ink portfolio. Like Chase, the launch of Spark Business enables Capital One to concentrate its marketing on one brand.

Other interesting aspects of the Spark Business launch:

  • One of the cards–Spark Miles–is a small business version of its well-known Venture Rewards card, featuring two miles per dollar on all spending with no limits, and an annual fee of $59.  There is also a cash back version of this card, called Spark Cash
  • In an earlier blog, we highlighted the fact that many small business card issuers are offering large bonuses to drive small business credit card spending.  Capital One is no exception to this, with Spark Miles offering a bonus of up to 15,000 miles, and Spark Cash promoting up to $150 cash back
  • All of the Spark products have no foreign transaction fees. This is a standout feature, as most other issuers only eliminate foreign transaction fees on their high-end cards
  • All of the Spark Business products offers card personalization options and free employee cards

Bank of America credit card production by channel: interesting trends

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.