Even at their giddiest moments during the launch of the Shell MasterCard from Chemical Bank a year ago when executives from the companies vowed it would be the largest cobranded effort to date -- they didn't know how successful it would become.
By midyear, Chemical boasted 1.8 million Shell accounts, with $1.25 billion in balances.
Moshe Orenbuch, an analyst with Sanford C. Bernstein & Co., estimates Shell cardholders charged $1.5 billion in eight months. He called the program a "spectacular success."
"The usage of the Shell MasterCards as well as the growth in average balance per account have far exceeded our expectations," said Charles R. Walsh, executive vice president of Chemical Bank.
"Shell MasterCard holders are using the card very much like a general purpose bank card," he added, "which was critically important to Chemical Bank."
Many industry observers had predicted that the Chemical-Shell product would be used heavily, but would not yield much in the way of income-producing receivables.
"On the contrary," Mr. Walsh said, "there has been major growth in outstandings."
After the November 1993 launch, it took Chemical-Shell two months to open a million accounts. That compared favorably to the two top cobrand launches to date: the General Motors MasterCard, which took a month to land a million accounts, and the AT&T Universal Card, which took 78 days.
Initially, Chemical said it would market to Shell's four million in-house cardholders. In an effort to convert them, the bank sent the colorful card with a picture of a shell on the front and cardholder names on it. To activate the card, all they had to do was call a toll free number.
Additionally, Shell -- the nation's top petroleum marketer -- kicked in $10 million for a national advertising campaign targeted at least five million other potential customers.
Those using the cards are buying more Shell gas to get the rebates. Cardholders earned $26 million in free Shell gas by mid-July. On average, the companies said, Shell MasterCard customers are saving 10 cents a gallon on their annual Shell gas purchases.
Rebates are awarded to cardholders each month and are applied automatically to future Shell purchases. Cardholders earn 2% on general purchases and 1% on Shell gas purchases each year. After hitting the $70 rebate limit, cardholders continue to earn 1% on Shell purchases.
The interest rate will be 17.4% for the first year -- right at the industry average - then prime plus 11.4%.
Cobranded petroleum card launches have captured other headlines in the past year, involving Unocal and Amoco. In June, the British Petroleum-Bank One card joined the fray.
"We find it interesting to note some of our competitors find a cobranded card would have value," Mr. Walsh said.
Amoco, the second-largest gasoline marketer, introduced a cobranded Visa with Associates National Bank of Delaware. The product has a similar rebate structure to Shell's but carries no annual fee and a 17.9% annual rate, which moves to prime plus 11.9% after Oct. 31.
BP followed in June with a Visa card from Bank One of Columbus, Ohio. It offers a 3% rebate on BP gas purchases and 1% on general purchases, up to $300 in free gas a year. There is no annual fee and an 8.9% introductory rate.
To compete against these and other products, Mr. Walsh said, Chemical is likely to introduce a new enhancement to the Shell MasterCard, such as another purchase category that the rebate can be applied to.
Mr. Walsh said the Shell program represents more than 20% of Chemical's total outstandings. "It's a very important complement to our base of business," he said.
Any way you look at it, the Shell program has elevated Chemical Banking Corp.'s profile in the credit card industry.
"It certainly puts them back into the position where they are adding accounts; before they were `attritting'" said Bruce Brittain, president of the Atlanta research firm Brittain & Associates Inc.
"It seems like they've finally come to life," added K. Shelly Porges, chief executive of Porges/Hudson Marketing Inc., San Francisco.
"The Shell card appears to be a nice coup," said Alex W. "Pete" Hart, the former MasterCard International chief executive, now with Atlanta Corp. But he added, "It's only a nice milestone for a guy who's had a good career."
Mr. Walsh, 55, became executive vice president and group executive when Chemical Banking Corp. and Manufacturers Hanover Corp. merged on Dec. 31, 1991. He is responsible for all of Chemical Bank's MasterCard, Visa, affinity card, and check-credit banking -- a $6 billion business.
"He's a fine marketer," said Mr. Hart, now executive vice president of Atlanta Corp. "He's certainly done a fine job of orchestrating the coalescence of Manny-Hanny and Chemical Bank."
Mr. Walsh joined Manufacturers Hanover Trust Co. in 1974 as vice president in charge of Master Charge. In 1980 he became senior vice president, and in 1986 executive vice president in charge of the Retail Card Services Division. In 1990 he was promoted to group executive.
Mr. Walsh is a director of MasterCard International Inc., a former president and director of the Bankcard Association Inc. And he was one of the leaders of Eastern States, a major credit card processing association that has since been acquired by First Data Resources Inc. He is a member of the government relations council of the American Bankers Association and its administrative committee.
For eight years, he served as an adjunct professor of Fordham University's Graduate School of Business Administration, his alma mater.
Prior to his banking experience, Mr. Walsh held management positions at Texaco, Avon, and TWA.
Long faltering under the stresses of the big New York merger, Chemical's bank card program has indeed shown signs of coming back to life. A retention-rebate program introduced in fall 1993 has reduced attrition by "several percentage points," Mr. Walsh said.
"Our pricing is appropriate for the current marketplace," Mr. Walsh said. The ability to offer fixed and variable rate products is especially important if interest rates are on the rise. "Consumers are concerned about variable rates rising," he added.
At the same time, Chemical's card outstandings jumped this year. He said Shell and non-Shell should have an overall 25% to 30% growth, or $2 billion. "It looks like it will be a record," Mr. Walsh said,
As with many successful credit card programs, Chemical's contributes significantly to its parent holding company, generating an after-tax return on assets of greater than 2%, and a return on equity nearing 40%.
