Ed Kountz [Posted by Ed Kountz]


Early on in this blog, I predicted that 2009 would see an increase in the number and stridency of calls for reforms to the

U.S. credit card market, particularly in terms of types and amounts of acceptible fees. The Federal Reserve’s December 2008 card industry changes certainly made clear that this was happening. But now, the long-simmering brew appears to be spreading. 

Two recent events serve to validate the premise: 


–The Natioanl Retail Federation (NRF), the National Grocers Association (NGA) NACCS Move Against Interchange. Recently, the NRF, NGA and NACCS — together, the big three of retail assocations — recently held what their release billed as a “telephonic press conference” announcing the creation of “unfaircreditcardfees.com,” as well as an associated public interest campaign,  to encourage consumers to press legislators for reforms to the “unfair and hidden credit card fees called “interchange””. This approach muddles the issue, in my opinion, as it uses language that ties the interchange dispute to consumers’ raw emotions at the account-fee issue, without identifying the (basic but relevant) differences in those topics. Whatever the ultimate impact, the directness of the appeal is impossible to miss.


–Senate Banking Committee Approves Card Reforms. On March 31, the Senate Banking Committee gave one-vote approval to measures designed to rein in certain credit card industry practices.  The bill would include most of the Federal Reserve Rule changes passed in December, such as bans to universal default and double cycle billing, but would add fee restrictions and protections for borrowers under 21. Bill sponsor Chris Dodd said he was going to work over the recess to garner “broad support” for the effort.


As recent delinquency trends suggest, economic conditions continue to impact credit card usage and growth at a macro level. But increased scrutiny of long-held credit card industry practices will add additional pressure to an industry already feeling the strains. By altering industry dynamics, the impact of such changes will raise the bar on profitable operations, even at a time when consumers’ demand for credit is lower than it has been in some time. While this trend will impact both retailers and issuing banks, e-Business marketers within card-issuing institutions will particularly feel the impact. Moving forward, card marketing is going to require tighter focus on the basic drivers that spur consumer card uptake and drive depth of relationship. In addition, a retrenchment away from acquisition, and towards activation and retention, will also be required. Understanding the factors and channels that most influence consumers’ card choices, can assist in targeting the right offer to the right cardholder at difficult times.

So what can e-Business executives do to adapt? First, to maximize returns on dollars invested, successful acquisition and activation will become that much more important. Marketing on the features and brand traits that drive adoption for key user groups will be essential, but so too will creating a relationship that goes beyond those features. Onboarding is also growing in importance  — the look and feel of a customer welcome can now be digitized, and tied to additional value-add (such as extra miles or cash) to covert non-activated cardholders, enabling “reengagement” with card holders who acquire but do not initially activate.


What is your firm doing differently to engage with credit card prospects/ consumers in this environment? My upcoming report “Drivers in US Credit Card Acquisition: Leveraging Must-Haves to Maximize Acquisition and Activation in Tight Times” will highlight the use of demographic trends and preferences in maximizing acquisition and activation in more detail, as well as outlining the evolution of digital onboarding. If you have seen (or championed) processes that have been innovative or particularly effective, I'd like to know. Please leave me a comment, or email me at ekountz@forrester.com.