Report: Credit Card Industry Revenue Fell 6% in 2011

By Fitzgerald, Kate | American Banker, January 4, 2012 | Go to article overview

Report: Credit Card Industry Revenue Fell 6% in 2011


Fitzgerald, Kate, American Banker


Byline: Kate Fitzgerald

The economy may be crawling back to normal in some sectors, but credit card industry revenue continues to fall, according to one longtime observer.

One big problem is that consumers have turned away en masse from using credit cards, causing their revolving debt to decline over the past two years.

But even if borrowing picks up, card issuers still will need a way to make up lost revenue after rules associated with the Credit Card Accountability, Responsibility and Disclosure Act that went into effect nearly two years ago restrict their ability to preemptively raise interest rates on risky cardholders.

Total revenue in 2011 for the credit card industry was $154.9 billion, down 5.5% from $163.9 billion the previous year, the Thousand Oaks, Calif., credit card advisory firm R.K. Hammer reported Jan. 3. Hammer's analysis combines the estimated revenues of all U.S.-issued general-purpose and private-label credit cards.

The ongoing pressures to offset lower revenues are prompting issuers to consider reducing expenses further through fresh rounds of staff cuts and possibly by outsourcing more positions offshore, Robert Hammer, the firm's chairman and chief executive, tells PaymentsSource. "Consumers are spending less, revolving less and being more cautious, which has driven down total receivables and hurt revenues," Hammer says. "That leaves the expense line as one of the few things issuers can control, which inevitably means staff cuts."

Few of the major card issuers are adding staff, and many recently have outsourced more positions to Singapore, Brazil and India, Hammer says. …

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