Program Management: Tomorrow is Here
Whether we like it or not, the credit card industry is in the midst of dramatic change. Every single issuer is being forced to reexamine the most basic assumptions in their program’s design. We need to ensure that our credit card programs are not only compliant (or risk massive fines) but also that they are structured for the right balance of member value and long-term profitability.
Two factors have come together to create the perfect storm for credit card issuers, credit unions included. First, as we all know, we are in the midst of a seas change in understanding the riskiness of the American consumer at the same time as they fundamentally change their spending behavior. The credit card industry will contract (by as much as 30% according to some industry experts) and consumer spending is both declining overall and shifting toward debit and other payment vehicles. As such, credit card issuers must recalibrate their expectations for their card programs: growth cannot be the only goal or credit risk may increase to intolerable levels. Credit losses will not return to historic levels for quite some time (if ever) and programs will have difficulty generating the kinds of profits many came to rely on during happier times. In fact, second quarter data through the NCUA site shows that perhaps 1-in-7 credit unions today are losing money on their card programs (See Related Chart), with that number certain to increase as credit losses trends point to further increases and the impacts of the CARD Act are felt going forward.
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