Newcomers to the wild and woolly credit card industry got a concentrated view of the increasingly competitive field during the American Bankers Association's 25th annual National School of Bank Card Management.
And they learned that the industry, though fiercely competitive, is ripe for profit-taking.
Students converged April 13 on the University of Delaware's Clayton Hall in Newark for the start of a weeklong session. A second undergraduate school will meet this summer, in Norman, Okla., where a graduate school for upper-management bankers will also be offered.
The class consisted of 144 bankers and finance managers from the United States, the West Indies, Hong Kong, Mexico, and Singapore.
Students met for morning and afternoon lectures. In the evenings, they participated in model banks, or case groups, designing simulations of issuer and merchant portfolios. Each bank competed for the top slot at the end of the week.
Perhaps, not surprisingly, the Tiger bank won over the likes of Piggy, Tuna, Duck, Turkey, and Trap.
"It was a great introduction for me," said Penny Joines, vice president of partnership marketing for First USA, Wilmington. "We worked as teams to solve problems in the case studies. The fact that we worked for different banks never got to be a problem."
Ms. Joines had been working in the credit card industry for just six weeks before coming to the conference.
The first night, Michael Auriemma, president, Auriemma Consulting Group Inc., Westbury, N.Y., spoke at length about prospects in such a highly competitive environment.
"The industry is changing very, very rapidly," Mr. Auriemma said. "It's a constant exercise in judgment, in strategic vision, and risk management."
He said that consumer bankruptcies have increased 20% to 30%, and consumer debt burdens now equal 19% of disposable income. He added that unique or profitable card programs can be quickly replaced by competitors.
Mr. Auriemma's comments inspired the manager of a Midwestern cobranded program, who asked to remain anonymous, to whisper, "We're all just cannibalizing each other."
Collin McKenny, senior vice president for Star Banc Corp., Cincinnati, spoke the next day about bank card profitability. She tried to identify the different expense elements that go into building standard, gold, and business card portfolios.
To make a profit, she said, it is important to look at individual accounts. "We are managing nickels and dimes, not millions and millions in this business," Ms. McKenny warned.
She emphasized the difference between "revolvers" and "convenience users," and how these very different groups can affect profits.
Students learned that revolvers provide a feast for the bank issuers by racking up fees and interest charges.
Convenience users, on the other hand, are unprofitable because they take advantage of the 30-day grace period by buying goods with credit cards and paying off their balances before finance charges are assessed.
Many of the lectures dealt with technological advances in the industry. Attendees were encouraged to embrace the changes to avoid becoming fossilized.
Speaking about electronic commerce and on-line banking, Richard Crone, a consultant for Crone and Co., La Canada-Flintridge, Calif., showed that since the '70s, banks have had a decreasing share of the financial market.
"They must navigate into new markets and profitable niches," said Mr. Crone. "Or they will go the way of the dinosaur."
