Credit Card Acquisitions: Maximizing Results amid Change

  • ID: 4496438
  • Report
  • 14 Pages
  • Mercator Advisory Group
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Despite Large Volumes of New Credit Card Accounts, High Attrition Results in Limited Gains

FEATURED COMPANIES

  • Bank of America
  • Capital One
  • Citi
  • FICO
  • FIS
  • Mastercard
  • MORE

With U.S. credit card attrition rates at 15%, issuers need to book that amount just to keep interest-generating portfolios on par. The credit card acquisition function is the payments lifeblood, essential to grow the business and offset cardholder attrition. High customer attrition rates require credit card issuers to adapt to a changing market. They also must keep the credit card value proposition attractive to retain accounts.

Credit card issuers in the U.S. market booked 66.6 million new accounts in 2017, but the total volume of accounts grew by only 2.3 million because of account attrition. Credit Card Acquisitions: Maximizing Results amid Change, discusses the high volume of account attrition and the industry trend toward digital acquisitions, projects how the credit card acquisition model will shift through 2022, and recommends practical strategies for credit card issuers to adapt to a changing market.

"Issuers in the U.S. credit card industry should be urgently concerned," commented Brian Riley, Director, Credit Advisory and author of the research note. "Issuers continue to open large volumes of new accounts. Since 2015, we have seen more than 60 million new accounts annually in the U.S. market, but total account growth occurs at a snail’s pace.

This means cardholders are leaving their issuers almost as quickly as issuers book new accounts. As can be observed from many issuers’ loss numbers, accounts in the portfolios have not seasoned, so risk and delinquency are high. Also, these results show that the rewards model is flawed. Could it be that consumers have outfoxed the rewards incentive model? Have they outfoxed the issuers by shifting their loyalty to the best introductory offer? In a 2017 report, the author identified how the return on asset (ROA) metric for credit cards in the U.S. plummeted from 7.65% in 2006 to a projected 3.74% in 2017. One of the driving factors is net revenue per account, and attrition is an obvious component."

Highlights of the research note include:

  • U.S. cardholder attrition rates
  • Total numbers of new accounts
  • New account bookings by year
  • Sources of U.S. card acquisitions
  • Projected card acquisition volumes by channel through 2022.
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FEATURED COMPANIES

  • Bank of America
  • Capital One
  • Citi
  • FICO
  • FIS
  • Mastercard
  • MORE

1. Executive Summary

2. Introduction

3. Credit Card Account Attrition: The Bane of Portfolio Management

4. Credit Card Acquisitions: Portfolio Lifeblood

5. Solicitation Channels: Out with Mail, In with Digital Channels

6. Market Observations

  • Digitalization Is the New Order
  • The Changing Market Requires Targeted Strategies
  • Use Digital to Set the Pace of the Relationship

7. How the Acquisition Changes Affect Your Organization and What to Do

8. Conclusions

List of Figures
Figure 1: Total number of general purpose credit cards and annual attrition rate, U.S., 2009–2018F
Figure 2: New general purpose credit card bookings by year, U.S., 2008–2018F
Figure 3: General purpose credit card acquisition by channel, U.S., 2017
Figure 4: Seven strategies for managing the new realities of credit card acquisitions
 
List of Tables
Table 1: Outlook for credit card acquisition channels, U.S., to 2022
Table 2: Impacts of the shift to digital acquisition, and recommended actions

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  • BB&T
  • Bank of America
  • Capital One
  • Chase
  • Citi
  • Discover
  • FICO
  • FIS
  • First Data
  • Fiserv
  • Mastercard
  • PNC
  • SunTrust
  • TSYS
  • Visa
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