Despite Large Volumes of New Credit Card Accounts, High Attrition Results in Limited Gains

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New research report by Mercator Advisory Group examines the impact of account attrition and the shift in credit card acquisitions to the digital channel.

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Issuers continue to open large volumes of new accounts. Since 2015, we have seen more than 60 million new accounts annually in the U.S. market, but total account growth occurs at a snail’s pace. This means cardholders are leaving their issuers almost as quickly as issuers book new accounts.

With U.S. credit card attrition rates at 15%, issuers need to book that amount just to keep interest-generating portfolios on par. The credit card acquisition function is the payments lifeblood, essential to grow the business and offset cardholder attrition. High customer attrition rates require credit card issuers to adapt to a changing market. They also must keep the credit card value proposition attractive to retain accounts.

Credit card issuers in the U.S. market booked 66.6 million new accounts in 2017, but the total volume of accounts grew by only 2.3 million because of account attrition. Mercator Advisory Group’s latest research report, Credit Card Acquisitions: Maximizing Results amid Change, discusses the high volume of account attrition and the industry trend toward digital acquisitions, projects how the credit card acquisition model will shift through 2022, and recommends practical strategies for credit card issuers to adapt to a changing market.

“Issuers in the U.S. credit card industry should be urgently concerned,” commented Brian Riley, Director, Credit Advisory, at Mercator Advisory Group and author of the research note. “Issuers continue to open large volumes of new accounts. Since 2015, we have seen more than 60 million new accounts annually in the U.S. market, but total account growth occurs at a snail’s pace. This means cardholders are leaving their issuers almost as quickly as issuers book new accounts. As can be observed from many issuers’ loss numbers, accounts in the portfolios have not seasoned, so risk and delinquency are high. Also, these results show that the rewards model is flawed. Could it be that consumers have outfoxed the rewards incentive model? Have they outfoxed the issuers by shifting their loyalty to the best introductory offer? In a 2017 report, Mercator Advisory Group identified how the return on asset (ROA) metric for credit cards in the U.S. plummeted from 7.65% in 2006 to a projected 3.74% in 2017. One of the driving factors is net revenue per account, and attrition is an obvious component.”

Highlights of the research note include:

  •     U.S. cardholder attrition rates
  •     Total numbers of new accounts
  •     New account bookings by year
  •     Sources of U.S. card acquisitions
  •     Projected card acquisition volumes by channel through 2022

This research report contains 14 pages and 6 exhibits.

Companies mentioned in this research report include: Bank of America, BB&T, Capital One, Chase, Citi, Discover, FICO, First Data, FIS, Fiserv, Mastercard, PNC, SunTrust, TSYS, and Visa.

Members of Mercator Advisory Group’s Credit Advisory Service have access to these reports as well as the upcoming research for the year ahead, presentations, analyst access, and other membership benefits.

For more information and media inquiries, please call Mercator Advisory Group's main line: 1-781-419-1700, or send email to media@mercatoradvisorygroup.com.

For free industry news, opinions, research, company information, and more, visit us at http://www.PaymentsJournal.com.

Follow us on Twitter @ http://twitter.com/MercatorAdvisor.

About Mercator Advisory Group
Mercator Advisory Group is the leading independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors. Mercator Advisory Group is also the publisher of the online payments and banking news and information portal PaymentsJournal.com.

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