November 9, 2009
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News: Opportunities With Credit Cards
In the wake of the depression and record breaking credit card defaults lenders have faced new challenges in search of new ways to increase earnings. With the credit card market in the United States already saturated, lenders are looking outside the U.S. borders for untapped markets. A recent survey released by Packaged Facts, a division of Market Research.com indicated that financial institutions are exploring growth opportunities in the co-branded and affinity credit card markets in Europe, Asia, and other foreign countries. Of particular interest are the co-branded and affinity markets, with a focus on the health care, supermarket, and drug store businesses. Whereas these businesses are expected to continue the decline throughout 2009 in the U.S., there is a more optimistic global outlook.
Evidence shows that supermarket co-branded credit cards are widespread in Europe, however, is practically non-existent in the U.S. One explanation might be that typically most retail co-branded cards are associated with higher interest rates and fees. Supermarket and drug store retailers usually operate on low margins; on current credit card structures, the cost would further corrode the margin. From a consumer's point of view, lower interest rates and rewards offered by their bank card far outweighs any benefits of supermarket and drug store cards. Furthermore, the recession has caused such cards to plummet in value. Never the less, Packaged Facts believes that the U.S. should take notice of the European business and develop the market.
Packaged Facts suggest another area that has potential in the U.S.; they suggest that credit card companies explore ideas to market a product to sub-prime lenders who have no bank account. These consumers are sorely underserved by the financial industry. The do not qualify for a traditional card and because they have no banking account do not qualify for a debit card. A low risk product that would target this market has the potential to produce huge profits.