The LAB: Innovating a Credit Card with S.I.T. (June 2009)
Credit card companies must innovate to overcome the financial and public relations consequences of recent government legislation. The Credit Card Reform Act of 2009 is a “bill to protect consumers, and especially young consumers, from skyrocketing credit card debt, unfair credit card practices, and deceptive credit offers.” These changes go into effect in 2010, and they will undoubtedly reduce the financial performance of card issuers.
The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel. The credit card has become a ubiquitous symbol of consumerism since then. Many credit card innovations have emerged, some useful and others wacky. Recent innovations include: paperless statement; online statements; custom logos to display your affiliations with colleges, companies, and other groups; a magnetic strip to read information more efficiently and securely.
The key for credit card companies is to reduce their reliance on price (in the form of interest rates, penalties, and fees) and increase their pipeline of innovative services for which consumers will be willing to pay. That is the focus of this month’s LAB.