Capital One Trumps the Competition With 'No-Hassle' Cards; Lower APR Proves More Attractive Than Loyalty Programs in the Current Market Environment.

Business Editors

BOSTON--(BUSINESS WIRE)--Nov. 11, 2002

Consumers in search of a new credit card favor lower interest rates over reward or affinity programs, according to new consumer analysis from Compete, Inc. Compete analyzed consumer credit application behavior at Capital One, MBNA and Citibank during the three-month period ending July 2002 to assess cardholder growth factors at these three leading issuers. Compete's analysis showed that Capital One's strategy of offering a "No-Hassle" card at an APR of 4 to 5 percentage points below competitors' rates attracted applicants away from MBNA and Citibank. Both MBNA and Citibank rely primarily on affinity and reward programs to attract new cardholders.

Compete's data indicates that Capital One's strategy will attract substantial numbers of applicants away from MBNA and Citibank this year.

"Our analysis shows that Capital One's product messaging and pricing incentives resonate with consumers," observed Derick Sutton, Compete's Vice President of Client Services. "The Capital One No-Hassle marketing campaign is siphoning applicants away from competitors and generating the highest number of new card applications overall, apparently with only limited numbers of less credit-worthy applicants."

Although Compete's analysis focused on application submissions and did not include access to approval/denial data from the card issuers, the company believes the implications of its findings are significant for all credit card issuers.

The new Compete data showed that:

-- During the 90 days evaluated, Capital One dominated competitors in attracting new credit card applicants, averaging over seven times the applicant volume of Citibank and MBNA.

-- On average, 22 percent of MBNA's applicants also considered Capital One, and one- third applied for a Capital One card. Similarly, 17 percent of Citibank's applicants also considered Capital One, and one-fourth applied for a Capital One card.

-- An average of 15 percent of MBNA's and 24 percent of Citibank's credit application abandoners - consumers who started but did not submit an application - evaluated Capital One, and one-eighth of abandoners from both companies ultimately applied for a Capital One card.

Compete believes that the credit quality of applicants at Capital One was similar to those at Citibank and MBNA, since the demographic profiles of the defectors to Capital One from Citibank and MBNA were similar to the overall applicant pools for all three companies. In addition, the applicants' behavioral profiles and use of other financial service products, such as brokerage and banking accounts, did not differ among the issuers.

About Compete, Inc.

Compete, Inc. focuses its Business Intelligence (BI) services on strategic business issues including demand forecasting, pricing and promotions, marketing programs and product optimization. As the first firm to incorporate terabytes of external online consumer behavior data into its BI analyses, Compete is pioneering the use of online consumer data to predict offline consumer behavior. Based on the industry's largest pool of consumer behavior data, representing over 10 million consumers, Compete provides unprecedented consumer insights that its clients convert into powerful management tools for increasing market penetration, lifetime customer revenues and marketing ROI. Compete provides its Business Intelligence services to financial services, automotive, media and communications, and retail and consumer products companies. The company is venture-backed by leading investors, including Charles River Ventures and St. Paul Venture Capital. Compete is on the Web at www.compete.com.