sanjeev

Situational analysis of debit and credit cards
Visa and MasterCard are the world’s two main providers of credit and debit cards. The member banks of these companies issue cards sign up merchants, set card rates or get credit and debit customers for them. The market of credit card has significantly changed over the past few years. Now there is more competition among the providers. Credit card’s market is still growing while the debit card market has shown a steady growth in 2007. The number of issue of credit cards has gone down for second consecutive year. There is difference of opinion among consumers in the market. Some consumers are not using that much of credit card while others are using it more than often. The main reasons for the switch are:-
I. The debt levels have increased and also the cost of living.
II. Due to bad debts and other loans banks have been hit.
III. Reduction in the amount of credit available to lend to customers.
IV. Consumer trust in financial services organisations has been lost.
V. Replacement of cash and cheque transactions debit card.
There are number of ways by which the credit squeeze has an impact on credit card. They are:-
i. Creation of mistrust between lenders.
ii. Consumer lending criteria have been tightened by many lenders.
iii. Less confidence of consumers.
iv. Economy will take longer to recover even if credit markets recover.
Competitive analysis:-
i. The total number of credit cards issue has declined for second consecutive year.
ii. Master card has more credit cards in issue than visa while visa has more debit cards.
iii. The big four issuers of debit cards are Lloyds/TSB/HBOS, NatWest/RBS, Barclays, HSBC.
iv. HSBC has lost market share, whereas Abbey has seen a small increase.
v. Barclays/Barclay card and Lloyds TSB/HBOS remain market leaders.






Internal analysis of Barclay card
i. Barclays had 5.4 billion pounds of money to be collected from many consumers who cannot pay. Most consumers are just walking away from their loan and credit card debts and declaring bankruptcy.
ii. Barclays is one of the big four issuers of debit cards in volume.
iii. It has also the most credit cards outstanding in order of volume with 22%.
iv. They are the one of the market leader with Lloyds TSB/HBOS with a combined market share of 45%+
v. The Barclay card simplicity card offers 6.8% for the lifetime of the card.
vi. It is the biggest provider of credit cards in UK.
vii. It has diversified its credit range to cater for different segments of the market and claims to have 8.4 million credit card customers.
viii. The bank posted better than expected profit for 2008, but was down 14% from 2007.
ix. Barclay card has partnered with oyster to launch one pulse, described as ‘the three cards a Londoner needs’.
x. One pulse has three functions
a. Oyster functionality to enable people to get the cheapest fare on transport.
b. Normal credit.
c. Enables customers to make small cash less payments making it easy to make small purchases, like newspapers or lunch items, quickly and conveniently.
xi. Barclaycard has also partnered with O2 and Nokia to develop mobile payments, whereby small purchases can be made with the touch of a phone.

Four major issues facing Barclaycard


1. Barclays had 5.4 billion pounds of money to be collected from many consumers who cannot pay.
2. Most consumers are just walking away from their loan and credit card debts and declaring bankruptcy.
3. It has also the most credit cards outstanding in order of volume with 22%.
4. The bank posted better than expected profit for 2008, but was down 14% from 2007.




Four strategic options for Barclaycard
Target scope Advantages
Low cost Product uniqueness
Broad (industry wide) Cost Leadership Strategy Differentiation Strategy
Narrow( market segment) Focus strategy(low cost) Focus strategy(differentiation)





Cost Leadership Strategy
1. Access to the capital required making a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.

2. Skill in designing products for efficient manufacturing, for example, has a small component count to shorten the assembly process.

Differentiation Strategy
1. Highly skilled and creative product development team.

2. Strong sales team with the ability to successfully communicate the perceived strengths of the product.


Update on the credit and debit card market (2009-present)

Loan-Sharking Inc.
Congress and federal regulators need to do a lot more to make sure credit card companies stop using deceptive practices.



Banks Apply Pressure to Keep Fees Rolling In
As the government cracks down on overdraft fees, banks are mounting an aggressive campaign aimed at retaining billions of dollars in penalty income.
A Card Fee Still Hides in the Luggage
The Credit Card Act is reducing some fees, but the one on foreign transactions, an industry profit center, was not touched.
Rewards Cardholders Face a Higher Price for Perks
Banks are focusing on a new constituency: the solvent. Banks are trying to get these people to pay higher fees for the promise of perks once subsidized by weaker borrowers.
Credit Card Limits for Youth Can Be Opportunity for Parents
Rules that limit access to credit cards until the age of 21 go into effect this month, which is good news and bad for parents.
The Damage of Card Rewards
Fees that merchants build to cover rewards programs lead to higher prices, which are passed on to poorer consumers.
How Visa, Using Card Fees, Dominates a Market
When you sign for a debit card at a retailer, the store pays your bank more than twice as much as when you enter a PIN a strategy Visa hatched decades ago.
Redeem All of Gift Card, or Give Store a Present
Major retailers and banks often profit from unspent portions of gift cards, but consumers don’t seem to notice.
Americans Owe Less. That’s Not All Good.
Some Americans have paid down their credit cards and mortgages, but much of the shrinkage in outstanding debt is a result of bank write-offs.



The Lure of Store Credit Cards, and the Hook
A 15 percent discount, or no interest payments for 18 months, sounds enticing, but there are some other things you need to know about store-brand credit cards.
Site-Hopping for Holiday Savings
Instead of going straight to a retailer, online shoppers may do better by choosing another entrance to that retailer’s Web site.
U.S. Looks to Australia on Credit Card Fees
After a law forced a cut in transaction fees, some merchants and banks added new charges for customers that were, sometimes, higher than the old ones.
A Gift to Credit Card Companies
A Senate bill to move up the effective date of the law protecting consumers from predatory actions by the credit card industry should have become law already.
A Free Credit Score Followed by a Monthly Bill
The government is trying to counter what it says are ads that trick consumers into paying for credit monitoring.
Dodd Calls for Interim Freeze on Credit Card Fees and Rates
The bill, an attempt to prevent increases before a new law takes effect in February, is opposed by the banking industry.
Credit Card Chicanery
Credit card companies have intensified their exploitation of consumers, and Congress should respond by moving up the date when its credit card law becomes effective.
Vote Backs a Financial Oversight Body
A House committee cleared the way for an agency that would monitor consumer lenders for abuse.


Last-Minute Credit Card Tricks
Congress can end the injustices committed by credit card companies by moving up a deadline to phase out predatory practices, accelerating reform and helping consumers.
In House, a Bid to Hasten a Credit Card Law
Representative Barney Frank says credit card issuers have taken advantage of a delay in putting changes in place by raising customers’ rates.
Prepaid, but Not Prepared for Debit Card Fees
Prepaid debit cards are among the consumer banking industry’s fastest-growing products, but often their convenience comes with hidden fees.
Rich and Poor Should Pay Same Price
It seems absurd to have a system that requires people who do not use credit to subsidize those who do.
American Express to End Monthly Fees on Gift Cards
The $2-a-month fee will be dropped, a move that is likely to pressure its competitors to do the same.
Fed Proposes Rules on Credit Cards
The new rules are an effort to protect consumers from potentially costly practices by lenders and to put in place legislation enacted in May.
Chase and Bank of America Revise Fee Policies
Two banks are changing their debit card programs to end some charges that have enraged consumers.
Turning to Premium Credit Cards
Since the beginning of the downturn, issuers have created several new premium cards that come with fees and extra services.



Preventing Fees From Piling Up
Many consumers don’t realize their bank may automatically let a debit card transaction go through even if there is not enough money in the checking account.
Overspending on Debit Cards Is a Boon for Banks
Banks have long pitched debit cards as a convenient and prudent way to buy, but a growing number now allow consumers to exceed their balances for a price.
Maybe It’s Time to Change Credit Cards
Credit cards are raising rates and fees as new federal rules take effect. But if your credit is good, you can always switch card issuers
Debit Card Trap
If federal regulators don’t act quickly to enforce new overdraft rules that could provide more transparency, Congress should step in.
Card Users, Take Heart: One Penalty Is Vanishing
Other credit card companies might decide that it’s worth it to follow the lead of American Express and Discover and eliminate over-limit fees.
When Debtors Decide to Default
There is a small but increasingly noticeable group of strapped consumers who are deciding to simply stop paying their debts
Firm Agrees to End Role in Arbitrating Card Debt
A Minnesota firm, the National Arbitration Forum, had been sued over its handling of debt disputes between consumers and credit card companies.
A Day to Tackle the Financial To-Do List
Taking time, 10 or 12 hours, to tackle ever-postponed money tasks and clear the books can be lucrative.
Bank Fees Rise as Lenders Try to Offset Losses
Some institutions quietly and creatively charge people more to save and spend their own money.

A Fairer Credit Card? Priceless
Based on an examination of credit union cards, evidence suggests that the credit card act is likely to bring about moderate, and even positive, changes.
Banks Brace for Fight Over an Agency Meant to Bolster Consumer Protection
Banks fear they could lose billions of dollars because of an agency proposed to ensure that consumers are protected.
Credit Bailout: Issuers Slashing Card Balances
Customer service employees are calling to offer deals, a practice that was practically unheard-of before the financial crisis.
The Debt Settlement Industry Is Busy, but It’s a Bit Nervous, Too
An industry that offers to intercede on behalf of consumers is concerned that the economic crisis might prove to be its undoing.
Healthy Credit
An easy-to-understand chart could simplify interest rates, card fees and payment terms for consumers.
Financial Wisdom From a New Graduate
Madison Nipp, 22, a newly minted financial planner, offers some ideas to other recent college graduates.