Credit Card Issuer Profitability in a Difficult Economy: Issuers Must Focus on Interest Income While Balancing against Increased Default Risk.DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/research/744dd5/credit_card_issuer) has announced the addition of Javelin Strategy & Research's new report "Credit Card Issuer Profitability In a Difficult Economy: Issuers must Focus on Interest Income While Balancing Against Increased Default Risk" to their offering. Credit card issuers face increased pressure to maintain profitability in this difficult economic environment, with cardholder card·hold·er n. One who holds a card, especially a credit card. card  hold spending curtailed and rising default risk among a larger percentage of
consumers. Losses in lines of business other than credit card issuance
have affected institution-wide approach to risk--particularly risk of
default among credit cardholders--and therefore the approach that card
issuers can take in acquisition and ongoing management of cardholder
lines of credit. This Javelin report uses robust consumer data and
executive survey data to provide understanding of consumer and issuer
reaction to economic difficulties, and prescriptive pre·scrip·tive adj. 1. Sanctioned or authorized by long-standing custom or usage. 2. Making or giving injunctions, directions, laws, or rules. 3. Law Acquired by or based on uninterrupted possession. plans of action to create opportunities for card issuers, leveraging economic difficulties for competitive advantage. Primary Questions - What are consumer behavior changes Behavior change refers to any transformation or modification of human behavior. Such changes can occur intentionally, through behavior modification, without intention, or change rapidly in situations of mental illness. vis-a-vis their credit card usage as a result of the economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. ? - How are credit card issuers reacting to changes in cardholder behavior and in the economy? - What is the best way for credit card issuers to maintain a balance between profitability and risk against default? - Which segments of the consumer population pose a higher risk of credit card default? - How should issuers alter policy with regards to more risky cardholders? Methodology The consumer data in this report is based on data collected online from a random-sample panel of 1,500 respondents In the context of marketing research, a representative sample drawn from a larger population of people from whom information is collected and used to develop or confirm marketing strategy. in April 2008. The survey targeted respondents based on representative proportions of gender, age and income as compared to the overall U.S. online population. Overall margin of sampling error is O2.53 percentage points at the 95% confidence level. Executive data is based on an online survey collected from a sample of 13 credit card industry executives at top-tier credit card issuers in May 2008. Among issuers surveyed, 54% have issued more than 5 million cards, 8% have issued between 1 and 5 million cards, and 38% have issued less than 1 million cards. Audience: -Credit Card issuers -Specifically portfolio managers -Product development and product marketing managers -Card networks Key Topics Covered: Overview Primary Questions Findings and Analysis Methodology Executive Summary The Economy Affects Financial Institutions' Credit Card Issuance Policies Decreased Consumer Spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. and Potential Shift to Interest Income for Card Issuers is Not Without Risks--Political and Otherwise Consumers Attempt to Reduce Credit Card Usage, But are Less Able to Pay Off Balances Interchange An interchange is a location where two things meet, usually perform some kind of exchange, and possibly go on their ways again. It is most commonly used in four contexts:
tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict Spending Potential for Increased Consumer Reliance on Credit Cards as Recession Wears On Consumers Show Increased Difficulty in Paying Off Credit Card Debt Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards. Debt results when a client of a credit card company purchases an item or service through the card system. Card Issuers Face Increased Regulation and Scrutiny with Regards to Interest Rate Policies Over Half of Credit Card Issuers Surveyed Suffered Exposure and Losses Does the Economy Pose a Threat or Present an Opportunity? Issuers Cut Back Lines of Credit as a Response to Losses and Exposure More than Half of Middle-Aged middle-aged adjective Referring to a person between age 45 and 65, used in taking a history. Cf Elderly, Older. Consumers Less Able to Save Economic Difficulties Lead Middle-Aged Consumers to Cut Back Credit Card Usage Economic Situation Results in More Credit Card Debt for Middle-Aged Consumers Build or Buy: Vendor Solutions from the Credit Bureaus Intend to Find the Balance and Allay al·lay tr.v. al·layed, al·lay·ing, al·lays 1. To reduce the intensity of; relieve: allay back pains. See Synonyms at relieve. 2. Risk for Issuers Level of Trust in Financial Institutions Drops Among Middle-Aged Consumers Issuers Constrict con·strict v. To make smaller or narrower, especially by binding or squeezing. Acquisition of New Cardholders: Opportunity for Aggressive Issuers Mirror Image: One-Third of Issuers Expand Acquisition Monitor Middle Income Consumers Closely to Maintain the Risk-Opportunity Balance Credit Card Charge Off Rates Increase Over the Past Several Quarters Consumer Credit Outstanding Also Shows Increases 2007 to Early 2008 Gas Purchases and Other Staple Purchases are of Particular Interest in Shifting Behaviour Appendices ap·pen·di·ces n. A plural of appendix. : Additional Consumer and Executive Information Table of Figures Figure 1: Economic Impact of Various Consumer Behaviours Figure 2: Financial Institutions Suffering Losses due to Economic Conditions Figure 3: Financial Institution Reaction to Economy with Existing Cardholders Figure 4: Consumer Ability to Save as a Result of the Economy by Age Figure 5: Credit Card Usage Changes as a Result of the Economy by Age Figure 6: Ability to Pay off Credit Card as a Result of Economic Changes by Age Figure 7: Consumer Trust in Financial Institutions by Age Figure 8: Issuer Constriction constriction /con·stric·tion/ (kon-strik´shun) 1. a narrowing or compression of a part; a stricture.constric´tive 2. a diminution in range of thinking or feeling, associated with diminished spontaneity. of Cardholder Acquisition Figure 9: Issuer Expansion of Cardholder Acquisition Figure 10: Consumer Ability to Pay off Credit Card by Income Figure 11: Credit Card Chargeoffs by Quarter Figure 12: Credit Card Outstanding by Time Period Figure 13: Specific Behaviour Spending Changes among Consumers Figure 14: Credit Card Usage by Income Figure 15: Purchase of Luxury Good by Age Figure 16: Purchases of Luxury Goods by Income Figure 17: Credit Card Balance Changes by Age Companies Mentioned: - Equifax - Experian - Fair Isaac Fair Isaac Corporation (NYSE: FIC), founded in 1956 by engineer Bill Fair and mathematician Earl Isaac, provides consulting services and enterprise decision management systems. - TransUnion For more information visit http://www.researchandmarkets.com/research/744dd5/credit_card_issuer |
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