The U.K. cards industry is facing a period of unprecedented turbulence, due to a combination of market, economic, and regulatory changes that will create short-term challenges for nearly all issuers.
Recovering former levels of profitability will take some time. Credit card issuers must develop a clear understanding of business implications and available responses in order to minimise the difficulties and maximise opportunities. Strategies to consider include:
- Optimising the existing business model, focusing on opportunities to offset anticipated profit erosion
- Creating new business models to profitably serve the most affected segments
- Exiting parts or, in extreme cases, all of the business
Issuers can use compliance with regulatory changes as an opportunity to position themselves as consumer champions. Promoting their customer-friendly policies and practices may help issuers attract new customers and increase customer loyalty. This, in turn, can lead to improved profitability in the medium-to-long term and ensure that new business models are economically and politically sustainable.