+353-1-416-8900REST OF WORLD
+44-20-3973-8888REST OF WORLD
1-917-300-0470EAST COAST U.S
1-800-526-8630U.S. (TOLL FREE)


Asset-Backed Securities: A Primer for Credit Card Managers

  • ID: 4753848
  • Report
  • February 2019
  • Region: United States
  • 29 Pages
  • Mercator Advisory Group
With the Asset-Backed Securities Market on the Rebound, Credit Card Issuers Should Understand the Nuances and Benefits of this Financial Product


  • A.M. Best
  • Barclays Bank of Delaware
  • Citi
  • Fitch
  • Morningstar
  • Synchrony

Titled Asset-Backed Securities: A Primer for Credit Card Managers, this report is the first analysis of the asset-backed securities (ABS) market since the recession that focuses on the credit card industry.

Readers will learn about the logical and legal flows of credit card asset-backed securities (ABS), an important financing tool used by many top issuers. Asset-backed securitization enables lenders to originate credit card accounts, season their portfolios, and then sell the receivables to bank-owned trusts that enable investors to buy future revenue streams. Credit card issuers can generate servicing fees and then use the funds to reinvest in new accounts. One top-tier bank has 50 percent of its portfolio securitized, which is a key component of its growth strategy.

“The report presents a case study of the asset-backed securitization of a credit card portfolio of a major global bank to illustrate the level of analytics covered in an ABS prospectus. One important facet that is apparent is the importance of the FICO® Score and the way it is used throughout the credit cycle from origination to credit cycle management and ultimately through securitization,” notes the author of the report. He adds: “Dodd-Frank brought discipline to the ABS process, and issuers have a requirement to effectively manage their portfolios, particularly as they place blocks of accounts into the capital markets.”

Highlights of the research report include:

  • Asset-backed securitization volumes by issuing bank since the Great Recession
  • Forecasted market projections through 2023
  • A view of asset-backed security pricing strategies
  • An explanation of how funds disperse based on revenue streams
  • A review of the credit rating process
  • How credit managers play an important role in the success of ABS
  • A case study drawn from a major global bank that illustrates the seven key elements of an ABS prospectus
Note: Product cover images may vary from those shown


  • A.M. Best
  • Barclays Bank of Delaware
  • Citi
  • Fitch
  • Morningstar
  • Synchrony

Executive Summary

Asset-Backed Securities: Lending Giants Become Marketing Machines

  • Background
  • And Explode it Did
  • Asset-Backed Securities: A Simplified Explanation
  • ABS Purchasers Must be Sophisticated Investors
  • Putting ABS into Context: Credit Card Receivables
  • ABS Offerings are not Cookie Cutter Events

Asset-Based Lending: The Logical and Legal Process Flow

  • The Logical Process Flow of a Credit Card Asset-Back Securitization
  • The Waterfall: Trusts Define the Trust's Payment Hierarchy
  • The Legal Flow of an ABS Deal
  • Credit Rating Agencies Act as Objective Third Parties Since the Wall Street Reforms

The Role of Credit Card Managers and Operations Staff

  • Seven Important Topics to Look for in a Prospectus
  • Balance Ranges, Utilization, and Vintage Illustrate Portfolio Risk and Robustness
  • FICO Scores: The Acid Test for ABS Portfolio Quality

Credit Card ABS Market Outlook

  • Volume Growth will Continue
  • What this Means to the Credit Card Industry


  • Related Research
  • Endnotes

List of Figures

Figure 1: ABS purchases are typically sophisticated investors.
Figure 2: The logical flow of an abs deal begins with booking accounts and returns to re-invest the funds
Figure 3: The payments waterfall prioritizes who gets paid in what order
Figure 4: The legal flow of an ABS offering follows a series of steps before meeting investors in the market
Figure 5: Wall Street reforms made rating agencies more accountable for credit ratings.
Figure 6: The recession severely impacted the volume of asset-backed securitization in the United States

List of Tables

Table 1: Top issuers dominate the credit card asset-based securitization market: number of ABS offerings.
Table 2: Top issuers have placed $226.9 billion into securitized offerings since 2012 (dollar value in millions).
Table 3: ABS deals vary by issuer and by deal.
Table 4: The credit card ABS prospectus covers demographics, risks, and returns.
Table 5: In revolving credit, even small balances are important for determining portfolio value.
Table 6: Account credit lines indicate portfolio condition
Table 7: Account vintages illustrate the portfolio seasoning.
Table 8: Delinquency levels show current portfolio risk.
Table 9: Geographic dispersion may indicate risk or portfolio balancing.
Table 10: Other data, such as co-branded partners, can provide a view of risk.
Table 11: Almost every U.S. credit card issuance relies on the FICO Score to depict risk.

Note: Product cover images may vary from those shown
  • A.M. Best
  • Alliance Data Services
  • American Express
  • Bank of America
  • Barclays Bank of Delaware
  • Barclays Capital
  • Capital One
  • Chase
  • Citi
  • DBRS
  • Discover
  • FICO
  • Fitch
  • KBRA
  • Mastercard
  • Moody’s
  • Morningstar
  • Scotiabank
  • Securities and Exchange Commission
  • Sperry Corporation
  • Standard & Poor’s
  • Synchrony
  • TD Securities
  • US Bank
  • Wells Fargo Securities
Note: Product cover images may vary from those shown