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The Path Forward in an Intensified Regulatory Environment (U.K.)

BY KIM PURCELL

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:

  1. Optimising the existing business model, focusing on opportunities to offset anticipated profit erosion
  2. Creating new business models to profitably serve the most affected segments
  3. 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.

Impact of Change in Allocation of Payments