As the credit card industry's appetite for secured cards increases, Renaissance Bankcard Services is prepared to stake its claim in the market.
The Portland, Ore.-based marketer and servicer of secured-card programs has been carving its niche for the past few years, well before secured cards were even a whisper on the lips of some of the most influential credit card bankers.
Through Orchard Federal Savings Bank of Ontario, Ore., Renaissance recently added a new wrinkle to the bevy of services and programs it offers financial institutions.
The new service, which garnered its first customer in Citizens National Bank of Houston a couple of weeks ago, targets banks that don't have a credit card program, as well as banks that want to test secured cards before plunging into the sea of available offers.
Division of Labor
Orchard issues these cards and owns the receivables. Renaissance provides back office support. But the Orchard/Renaissance relationship runs deeper.
Irving Levin, the chairman and chief executive of Renaissance, is also chairman of Orchard bank's board of trustees. In April 1992, he and other principal executives from Renaissance formed a company called TL Holding to buy a majority of Orchard's stock.
"We bought stock in the bank knowing that we were going to be in the credit card business," said Mr. Levin. "It was important to have an issuing bank that we were involved with."
Mr. Levin concedes that selling banks on secured cards a few years ago when the industry did not embrace the product was never a consideration. But, he said, "as the increase of quality pr0dticts has opened the eyes of a lot of issuers, we decided to build the agent program earlier this year."
Thus, Orchard became the vehicle by which Renaissance offers its latest service, an agent bank program.
Agent Bank 'Benefits'
The so called "agent bank" benefits from the program by receiving $20 for each account approved and $3 for each renewed account. In addition, the agent bank fulfills Community Reinvestment Act requirements by offering credit to someone who wouldn't otherwise qualify for a loan.
Orchard and Renaissance share the interest income, provide the back office services, and bear the fraud and credit risks as well as regulatory scrutiny.
Jim Meadows, chairman and chief executive of Citizens National Bank, said that the program helps his bank meet its customers' needs. Many of the bank's customers have relatives in Mexico, he explained, but they do not own credit cards, which makes it nearly impossible to rent a car to travel to their families.
"A lot of our customers have low- to moderate-incomes, but are basically credit worthy," said Mr. Meadows. "They came to us complaining that we gave them mortgages but not credit cards."
$35 Annual Fee
Citizens National began accepting applications last week for its new secured card, which has an 18.9% interest rate, a $35 annual fee, and requires a $400 minimum deposit to secure the credit line.
Renaissance expects to sign up at least a dozen more banks to the agent program by the end of the year.
Mr. Levin, who founded one of the most successful issuers of secured cards in 1988, First Consumers National Bank of Beaverton Ore., maintains that the secured-card market will soon mirror the unsecured card market.
The pioneers of secured cards like Key Federal Savings Bank and Bank of Hoven, said Mr. Levin, are already losing market share to the large issuers.
"I believe that the lion's share of the market will be issued by the biggest players," said Mr. Levin. "As the business grows, more banks will want to outsource their programs," because of the labor-intensive customer service and higher costs associated with managing a secured-card portfolio.
Renaissance is positioning itself to deliver any service a secured card issuer might want to outsource.
Orchard bank, which issues its own proprietary secured credit card, also issues cards for other Renaissance tailored programs.
Orchard has issued 116,000 secured cards with $45 million in outstanding receivables through about 10 different such programs since 1992.
