A return to confidence and the rise of online commerce will drive future growth
Los Angeles, CA (PRWEB) May 05, 2012
The Credit Card Issuing industry has not fared well during the five years to 2012, as market saturation, unfavorable regulation and poor economic conditions hammered revenue. The industry took a one-two punch from the economic recession, with high unemployment, falling home prices and contracting credit prompting credit card use to decline and delinquency rates to rise. As a result, revenue is expected to fall at an average annual rate of 4.0% to $50.8 billion in the five years to 2012. From 2007 through 2010, a decline in revolving credit and higher delinquency rates caused a dramatic rise in loan loss provisions, which are funds set aside to cover debt that cannot be collected; currently, they absorb 26.3% of revenue, which is down slightly from a high in 2009. “Increasing unemployment, high consumer debt, falling property prices and in some cases, negative equity, have driven the rise in charge-offs and delinquencies,” said IBISWorld industry analyst Eben Jose. Consequently, demand for credit cards suffered and consumer spending declined over the period, as uncertainty in the economic environment caused people to spend less and save more. Contrary to this trend, revenue and profit improved in 2011 as the unemployment rate decreased, consumer spending increased and loan loss provisions decreased in line with the improving economy. As a result, industry revenue is expected to increase 3.8% in 2012, after an increase of 3.9% in 2011.
As the economy continues to recover, renewed consumer and business confidence will encourage people to spend more. The level of discretionary spending will return as the unemployment rate falls, and credit card issuing companies will likely profit in the process. The rise of online and mobile commerce and the ongoing trend away from cash represent opportunities for industry growth. Consumers and businesses will increasingly use credit cards in their daily transactions, and the number of cards issued is forecast to rise as companies increase rewards benefits. IBISWorld projects that prosperous times lie ahead for the industry, with revenue expected to grow over the five years to 2017. Profit margins are also expected to increase, as more consumers will be able to make their payments, decreasing loan loss provisions further.
The concentration of the Credit Card Issuing industry in the United States is high, with the four largest players accounting for 84.4% of the market. JPMorgan Chase, Bank of America, Citigroup, and American Express dominate the industry, but the issuance of credit cards is generally concentrated among the largest six firms. The other two firms that make up the top six players include Capital One and Discover Card. According to Jose, industry concentration has increased substantially over the five years to 2012, as merchants' freedom to refuse certain higher-fee cards and banks' freedom to issue any type of credit card, have generated new alliances in the industry. Mergers and acquisitions over the past five years have also led to greater concentration. IBISWorld expects further consolidation to occur, as more mergers and acquisitions occur in the coming years and major players acquire smaller market share issuers. For more information, visit IBISWorld’s Credit Card Issuing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry issues credit cards, providing the funds required to buy goods and services in return for payment on a full balance or installment basis. Credit cards issued in the United States are not issued directly by Visa, MasterCard or any other payment-solution organization. Rather, Visa, MasterCard and other similar corporations provide the actual payment systems used when payments are made by credit card.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
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Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.