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After Boom and Bust: Navigating the Credit Card Industry into the Next Economic Cycle
TowerGroup
April 13, 2009
11 Pages - Pub ID: TWR2213818
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Business models for predicting changes in behavior and economic stress failed to protect credit card issuers from the recession that began in 2008, and their business assumptions are untested for the economy that will ensue.
Regulatory influence, consumers' diminished net worth, and a changing workforce together indicate disruption of credit card issuers' 30-year old business model.
Forward-thinking issuers will adapt their acquisition strategies to the form the industry is likely to take after 2010 and will consider the effects of the changing economy on their existing portfolios.
Although the credit model is under stress, branded card networks continue to flourish with transaction volumes in prepaid and debit, the transaction products into which card issuers should channel risky accounts.
Networks can easily adapt to changes in the mix of debit, credit, and prepaid because they are managing electronic digits, but card issuers must make adaptations at the cardholder level within the confines of regulatory changes.
Because of its size, with nearly $1 trillion in revolving credit, the industry will take time to change its business model, but it is essential to begin planning for the recovery phase of the economic cycle.
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