May 4, 2009
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News: Premium CC Customers Look Out
As credit cardholders have tightened up their belts and slowed down spending, MasterCard Worldwide is finding it more difficult to grow the market. At a recent summit in India, MasterCard Worldwide suggested charging credit card customers an annual fee to boost activity. They acknowledge, however, the only feasible market would be the high end segment. It appears MasterCard is lagging behind many private and foreign banks that have already begun launching premium segment cards. In fact, 80% of new cards issued by these banks during a three to four month period have been premium accounts. Citibank has their Platinum Select Card and ICICI Bank partnered with Singapore Airlines in launching their Visa Platinum credit card. Other prominent banks to follow with the premium accounts have been the Deutsche Bank and Standard Chartered partnering up with Emirates Airlines. Most of the new premium cards come with an annual fee.
Credit card companies earn revenue from three different avenues. The largest coming from the number of transactions consumers make. With usage down, banks have experienced a decline in revenue in this area. Companies also earn revenue from revolving credit. With the high interest rates, customers have turned to other avenues to meet daily expenses. Less usage means less revenue. Lance Blockley, Managing Director of Edgar, Dunn & Company, consultant for MC Worldwide says capitalizing on this premium market is their only alternative and says more than ever, the banking industry needs to focus on profitable customers. Consensus among bankers is that credit card customers in his segment have a better understanding of the annual fee and are more grounded in paying their debt. Banks like the premium customer because they travel more, spend more, and often cross sell them other products.
It looks like premium customers can expect to be the newest target of aggressive marketing strategies by credit card companies. However, banks say the selection process isn’t easy and quick. Banks look at many factors including annual salary, employment industry, education levels, and credit bureau histories. The final decision takes into consideration all of these factors.