A return to confidence and the rise of online commerce will drive future growth
(PRWEB) March 09, 2014
The Credit Card Issuing industry has not fared well over the five years to 2014, as unfavorable regulation and poor economic conditions hammered revenue. The industry took a one-two punch as a result of the recession, with high unemployment, falling home prices and contracting credit, causing credit card use to decline and delinquency rates to rise. As a result, revenue is expected to fall at an average annual rate of 1.9% to $95.0 billion in the five years to 2014.
According to IBISWorld Industry Analyst Daniel Carusotto “From 2008 to 2010, a decline in revolving credit and higher delinquency rates caused a dramatic rise in loan loss provisions; funds set aside to cover debt that cannot be collected.” Increasing unemployment, high consumer debt, falling property prices and, in some cases, negative equity have driven the rise in charge-offs and delinquencies. 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. After four straight years of declining revenue, the industry turned the corner and grew 7.0% in 2013, fueled in part by a stronger economy and the end of the household deleveraging process (households taking on less debt). The industry is expected to continue the momentum and grow by 3.2% in 2014, but remain well below prerecession levels.
However, as the economy continues to recover, renewed consumer and business confidence will encourage people to spend more. “Discretionary spending will rise as the unemployment rate falls, with credit card issuing companies likely gaining profit in the process,” says Carusotto. 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; 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 2019. Profit margins will continue to expand as loan loss provisions continue to decrease and return to normal levels.
For more information, visit IBISWorld’s Credit Card Issuing in the US industry report page.
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IBISWorld industry Report Key Topics
Credit Card Issuing 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
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