Credit Card Issuer Profitability in a Difficult Economy: Issuers Must Focus on Interest..

Credit Card Issuer Profitability in a Difficult Economy: Issuers Must Focus on Interest Income While Balancing against Increased Default Risk

DUBLIN, Ireland--(Business Wire)--
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
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 plans
of action to create opportunities for card issuers, leveraging
economic difficulties for competitive advantage.

  Primary Questions

  - What are consumer behavior changes vis-a-vis their credit card
usage as a result of the economic downturn?

  - 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 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 +/-2.53 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 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 Revenue May Suffer in the Immediate Term as Consumers
Curtail Spending

  Potential for Increased Consumer Reliance on Credit Cards as
Recession Wears On

  Consumers Show Increased Difficulty in Paying Off Credit Card Debt

  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 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 Risk for Issuers

  Level of Trust in Financial Institutions Drops Among Middle-Aged
Consumers

  Issuers Constrict 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: 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 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

  - TransUnion

  For more information visit
here

Research and Markets
Laura Wood
Senior Manager
press@researchandmarkets.com
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