New Credit Card Accounts Up but Volumes Remain Flat

by Brian Riley 0

Woman hand holds a credit card and uses a laptop computer to shop online.

Here is news pick up on a recent Mercator Advisory Group Research Note on new account acquisitions.  The big question is “Why has the US Card Industry Booked more than 60 million new credit card accounts since 2015, but total account growth is in single digits?:

  • With U.S. credit card attrition rates at 15%, issuers need to book that amount just to keep interest-generating portfolios on par. The credit card acquisition function is the payments lifeblood, essential to grow the business and offset cardholder attrition. High customer attrition rates require credit card issuers to adapt to a changing market. They also must keep the credit card value proposition attractive to retain accounts.

Evidently, the industry can book accounts but can issuers retain them?

  • Credit card issuers in the U.S. market booked 66.6 million new accounts in 2017, but the total volume of accounts grew by only 2.3 million because of account attrition. Mercator Advisory Group’s latest research report, Credit Card Acquisitions: Maximizing Results amid Change, discusses the high volume of account attrition and the industry trend toward digital acquisitions, projects how the credit card acquisition model will shift through 2022, and recommends practical strategies for credit card issuers to adapt to a changing market.

Think about it.  The rule of thumb is that a new account costs $ 275 to book; without costly introductory incentives many issuers tack on.  With 66 million new accounts, that is over $1 billion.  The economics are upside down.  We book accounts trying to cover account attrition.  It is almost a zero-sum game.

Credit Card Acquisitions: Maximizing Results amid Change answers some of these questions, and offers a view on account retention.

Overview by Brian Riley, Credit Advisory Service at Mercator Advisory Group

Read the quoted story here


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