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The New Reality in U.S. Credit Cards, and a New Day for One Bank

Theodore Iacobuzio |

Huntington Bank’s decision to issue its own credit card—in a variety of flavors—is maybe the first of many such moves. Previously the bank had issued general purpose cards through a third-party bank, essentially outsourcing the business. Huntington’s new MasterCard is its own—it owns the risk, and it owns the customer.

Your agent well remembers hearing more than 10 years ago the exit of one Southeast-based very well-capitalized bank (no longer a brand) from direct issuance into the shelter an agent bank relationship. I said to myself, “If this business is too hot for [insert name here], it’s pretty hot.”

Has it gotten any less hot?

In one way it has. There are fewer cards out there, for one thing—the average U.S. consumer had 1.96 credit cards at the end of 2012, compared with 3.7 at the end of 2009, a decline of nearly 47 percent, according to Experian and the Federal Reserve Bank of Boston.

It’s even more striking when you look at it on a household basis: by my count the average U.S. household had at the inception of the crisis just south of seven revolving cards, excluding private label, and it now has around four, a decline of about 43 percent. While the latter metric is slightly less dire, it does put into relief just how leveraged the U.S. consumer was back in the day.

And that day is gone. What has resurfaced is a U.S. consumer who, while still interested in spending, is just as interested in control—because the decline in the number of credit cards was just as much a result of voluntary attrition as it was of issuers’ interest in jettisoning unprofitable customers—sometimes, as transactors, among their best.

Huntington’s move represents an acknowledgement that this desire on the part of U.S. consumers to use credit cards as an expense management tool also impacts the bank’s own profitability model. The bank’s revenue position is now an output of the household’s total position with the bank—in deposits, in revolving credit, and in other kinds of lending.

It’s not surprising that a dynamic regional bank like Huntington should be among the first to realize this changed environment, which has the customer, or, rather, the household, at its center, instead of the product. It’ll be interesting to see which banks follows suit.

Topics: Payments Strategy

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