October 5, 2009
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News: RBS Changes CC Policy
Some might think a major UK credit card provider and prominent bank is taking a bold step with its new lending policy, however, from a marketing standpoint, it could be an ingenious move. The Royal Bank of Scotland (RBS) announced its new credit card lending policy that limits applications to only include RBS's existing bank customers. The main purpose for setting the new rigid guidelines is to reduce risk of credit card defaults in the wake of a weak economy. RBS which participated in the U.K.'s central bank's bailout program last year to help ride out the shaky economy has yet to repay the loan.
RBS and its fully owned NatWest card company are two of the U.K.'s largest card issuers. They are likely to receive a large following of their unprecedented move as other companies search new ways to reduce risk. The move allows RBS to have a fuller understanding of spending and financial habits of its credit card applicants since they have been previously servicing the needs of its banking customers. After all, who knows your financial position better than your own bank? By closing off applicants that are not already banking customers for RBS, the bank is narrowing the size of their market. Additionally, since they are the second largest credit card issuer in the U.K., the move will also limit the options available to future customers.
Whether or not RBS's strategy will work remains to be seen. However, limiting future credit card business could actually bring RBS new business. It is possible some customers could switch banking to RSB in order to have the opportunity to take advantage of the benefits of banking with one of the nation's most influential banks only second to the elite Barclaycard. Although representatives from both RBS and NatWest have confirmed the new policy, the transition appears to be a bit more confusing for bank employees who weren't aware of it when inquiries were made to their call center.