As an alternative revenue source for credit card firms, industry operators fared well
Los Angeles, CA (PRWEB) August 14, 2012
Operators in the Card Reward Program Services industry act as the middleman between credit and debit card issuers and merchants that provide promotions to their customers. Rewards are tied to card transaction volumes and value, so the industry's performance is closely tied to consumer spending habits and demand from credit card issuers. As such, industry revenue suffered during the recession, falling by 1.1% and 2.1% in 2008 and 2009, respectively. However, the industry received a strong boost in 2010, following the enactment of the Dodd-Frank Act. The act's Durbin Amendment limited big banks' ability to charge retailers large amounts in credit and debit transaction fees. This cut banks' available revenue streams, causing this market to seek out alternative methods, such as reward programs. As a result, industry revenue has grown at an average annual rate of 3.5% over the five years to 2012, totaling an expected $392.3 million by the end of the year, according to IBISWorld industry analyst Nikoleta Panteva.
During 2012, IBISWorld expects the Card Reward Program Services industry to record a strong 5.6% increase in revenue on the back of growing demand from credit card issuers. “As the economy slowly chugs into recovery, consumers - especially those in households earning more than $100,000 annually - will increase their expenditures and turn to credit cards to make purchases,” Panteva says. “This will also drive profit growth as the value of promotions increases and reward service providers charge merchants higher fees.” While the industry has enjoyed strong gains since 2010, its outlook is not as promising. Mounting external competition from social networking sites and banks' internal rewards programs could divert demand away from these third-party service providers. Moreover, if regulations continue to increase, banks and other card issuers may face even tighter revenue, which would limit their ability to sustain reward programs. As a result, IBISWorld forecasts industry revenue to grow over the five years to 2017.
The Card Reward Program Services industry has a low level of market share concentration. The industry is fragmented and largely comprised of companies that serve customers on a local or regional level. Therefore, no company holds a significant market share. Furthermore, the number of participants is increasing because new companies have a relatively easy time starting up and gaining customers. With low barriers to entry and strong anticipated growth during the foreseeable future, the number of firms is expected to increase over the five years to 2017. For more information, visit IBISWorld’s Card Reward Program Services in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes firms that provide card-linked marketing programs and services to merchants, banks, card issuers and loyalty programs.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
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.