Credit Cards: A Comeback?
In the wake of Durbin passing, some financial institutions are trying to get a larger cut of the credit card business to make up for huge revenue holes lost out from lower debit card interchange swipe fees as well as to drive loan growth — and the trend has been going on for some months.
Indeed, credit card issuers have been steadily becoming more aggressive throughout 2011 to capture more business, according to one credit card expect we spoke with last week.
“[Issuers] are starting to lower the bar ever so slightly in whom they are approving in order to expand the customer base. It’s a very heated area for good or excellent credit,” Bill Hardekopf chief executive of LowCards.com tells Bank Innovation.
Though the trend of issuers trying to capture more credit card customers has been going on for some months now, there’s a particular pool most issuers are going after: Prime customers.
Hardekopf, for one, believes credit card lenders are still gun-shy after getting burnt from bad loans felt most acutely during the Great Recession. Consumers’ credit scores have to be better in order for them to take out the loans, he says. Plus, many lenders aren’t increasing their credit limits quite as much as pre-credit crisis days, he tells us.
He’s not alone in his view. The execs at an FI vendor shared a similar sentiment with us recently, too.
“A lot of institutions are getting back into credit cards,” Tom Johnson, vice president of product and business development at Zoot Enterprises, told Bank Innovation.
Because of the growing competition among issuers and newer regulations, Zoot President Dennis Dixon advises issuers to fight for consumers who are on the margins of the prime credit spectrum.
“When you lose billions of dollars in interchange fees, you have got to go after something,” says Johnson.
Another way to capture consumers beyond somewhat loosening underwriting criteria? Slapping better rewards on the credit card, a trend that Hardekopf has observed and one we are starting to sniff out, too. Take Citibank. The lender recently made a splash by announcing a new loyalty program app that lets certain cardholders pool their reward points with their Facebook friends. We expect the announcement underscores how more and more issuers will become extra aggressive — and perhaps more innovative — in order to gain greater credit card market share.
In the wake of Durbin passing, some financial institutions are trying to get a larger cut of the credit card business to make up for huge revenue holes lost out from lower debit card interchange swipe fees as well as to drive loan growth — and the trend has been going on for some months.
Indeed, credit card issuers have been steadily becoming more aggressive throughout 2011 to capture more business, according to one credit card expect we spoke with last week.
“[Issuers] are starting to lower the bar ever so slightly in whom they are approving in order to expand the customer base. It’s a very heated area for good or excellent credit,” Bill Hardekopf chief executive of LowCards.com tells Bank Innovation.
Though the trend of issuers trying to capture more credit card customers has been going on for some months now, there’s a particular pool most issuers are going after: Prime customers.
Hardekopf, for one, believes credit card lenders are still gun-shy after getting burnt from bad loans felt most acutely during the Great Recession. Consumers’ credit scores have to be better in order for them to take out the loans, he says. Plus, many lenders aren’t increasing their credit limits quite as much as pre-credit crisis days, he tells us.
He’s not alone in his view. The execs at an FI vendor shared a similar sentiment with us recently, too.
“A lot of institutions are getting back into credit cards,” Tom Johnson, vice president of product and business development at Zoot Enterprises, told Bank Innovation.
Because of the growing competition among issuers and newer regulations, Zoot President Dennis Dixon advises issuers to fight for consumers who are on the margins of the prime credit spectrum.
“When you lose billions of dollars in interchange fees, you have got to go after something,” says Johnson.
Another way to capture consumers beyond somewhat loosening underwriting criteria? Slapping better rewards on the credit card, a trend that Hardekopf has observed and one we are starting to sniff out, too. Take Citibank. The lender recently made a splash by announcing a new loyalty program app that lets certain cardholders pool their reward points with their Facebook friends. We expect the announcement underscores how more and more issuers will become extra aggressive — and perhaps more innovative — in order to gain greater credit card market share.
