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Market Research Report

Small Credit Card Issuers 2012: Waiting for a Renaissance

Published by Mercator Advisory Group, Inc. Product code 233915
Published Content info 27 Pages
Delivery time: 1-2 business days
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Small Credit Card Issuers 2012: Waiting for a Renaissance
Published: March 12, 2012 Content info: 27 Pages

New research from Mercator Advisory Group examines developments in the often overlooked small issuer segment

Boston, MA -- Mercator Advisory Group's newest report assesses the odds of a renaissance of direct issuing among small issuers along with factors such as barriers to entry and competitive consumer challenges that affect those odds. Next, the research reviews a number of the important outsourcing partner firms serving this market.

As all financial institutions are faced with the challenge of growing their revenue-generating assets and putting their excess deposits to work, many smaller institutions are reexamining credit card lending as a growth opportunity or as a new product. Others that may have previously sold their card programs are again considering direct issuing. But will these new interests be able to turn around the long decline in the numbers of small FIs that directly issue credit cards? And what will these firms demand from their processing/outsourcing partners to support the increasingly complex credit card business?

“Considering the needs of small FIs to build assets, as well as the excellent resources available to effectively support small credit card programs via the processor/outsourcer community, the hopeful point of view would suggest the potential for strong growth in the ranks of small issuers. And indeed, we do hear from some processors/outsourcers that their pipelines of new issuers are strong. On the other hand, the hurdles are high for small FIs, and the established market trends are not positive,” comments Ken Paterson, VP for Research Operations at Mercator Advisory Group and the primary author of the report.

Highlights of the report include:

  • The overall shift in small bank credit card issuers since 2006 (based on combining the secular trend of consolidating financial institutions with portfolio sales).
  • Dominance of credit unions in the small issuer market and the portfolio sizes they are more likely to maintain.
  • Processors/outsourcers are key to maintaining small issuers, and have developed a remarkable standard array of technological and cardholder support capabilities.
  • How and why providers are differentiating their service offerings.

One of the nine exhibits included in this report:

Sources: FDIC, NCUA,Mercator Advisory Group
©Mercator Advisory Group

This report contains 27 pages and nine exhibits.

Companies mentioned in this report include: CSCU, Discover Network First Data Corporation, FIS, Fiserv, Jack Henry Associates, MasterCard, NEBA, PSCU Financial Services, TSYS Program Solutions, and Vantiv.

Table of Contents

Table of Contents


Is a Renaissance Dawning for Small Issuers?

  • Not a New Problem
  • Two Other Drivers of Decline
  • Issuer Resurgence: A Real Trend or Just Industry Buzz?
  • Barriers to Entry and Growth
  • Success Factors for Small Issuers
  • Competitive Consumer Challenges for Small Issuers
  • Program Commitment: How Low Can You Go?

Outsourcing: Making Small Issuers Feasible and Successful

  • It Takes a Lot to Be in This Business
  • Vendors and Differentiation
  • Other Stakeholders

Strategic Implications

  • The Implications of a Shrinking Pond
  • The Compliance Barrier
  • Needed: More Than a Level Playing Field
  • Processors/Outsourcers Move to High Touch as Well as High Tech
  • Copyright Notice

Figures and Tables

  • Figure 1: A Long-Established Trend: Decline in the Importance of Card Lending at Small Banks
  • Figure 2: In a Consolidation Environment, Bank Credit Card Issuers Have Declined Faster Since 2006
  • Figure 3: Small Banks Continue to Leave Card Issuing, While the Decline in Credit Union Issuers Stabilizes
  • Figure 4: Banks' Card Assets Are Heavily Concentrated with Large Issuers
  • Figure 5: A Higher Proportion of Credit Unions Maintain Healthy Portfolio Sizes
  • Figure 6: Small Issuers' Competitive Challenges: Rewards and Pricing Are Drivers of Card Selection
  • Figure 7: Small Issuers' Competitive Challenges: Consumers' Shift to Online Application Channels
  • Table 1: Outsourcing Partner Core Competencies, Part 1
  • Table 2: Outsourcing Partner Core Competencies, Part 2
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