Chrysler Entering Credit Card Business
Chrysler Corp. is preparing to enter the credit card business, joining the other major U.S. auto manufacturers and several other nonbanks that covet the banking industry's most profitable consumer product line.
Chrysler's finance subsidiary has laid the groundwork to offer private-label credit card services. A private-label provider issues and processes cards and manages credit receivables on behalf of retail merchants, whose names appear on the cards.
Two Firms Retained
The No. 3 automaker has not disclosed details of its credit card plans. But its entry into private labeling was signaled last week when two Florida technology companies announced that they had been retained to support the venture.
Chrysler First Inc., an Allentown, Pa.-based subsidiary of Chrysler Financial Corp., would be the first U.S. auto company affiliate to enter the private-label card business.
Ford Motor Credit Co. has a sizable MasterCard and Visa operation through two California-based affiliates, Associates National Bank and First Nationwide Bank. General Motors Acceptance Corp., which currently has a small affinity card program with CoreStates Financial Corp., is widely expected to enter the field soon.
The private-label card market is currently led by another non-bank, General Electric Co.'s GE Capital Corp. Several banks have exited the business in recent years but a few, led by Citicorp, still have significant presences.
Chrysler officials did not comment on the company's plans, but some details -- and a statement by one Chrysler executive -- were released through Florida Informanagement Services Inc. and Credit Card Software Inc., which are providing systems support.
Accounts Through Dealers
The companies said Chrysler First will provide charge accounts and financing plans for the dealer networks of manufacturers of consumer durables, such as furniture and appliances. Consumers will open credit accounts directly with their dealers.
"We wanted to get our program up and running very quickly, and at a minimum up-front cost," stated Richard P. Kile, senior vice president at Chrysler First. "Working with Florida Informanagement Services and Credit Card Software was the logical choice."
Advantages for Retailers
With retailers seeking to raise cash by selling their credit card receivables, the private-label business is growing faster now than it has in the past five years, industry observers said. Retailers that get out of the credit business still find it attractive to offer customers a card with the store's name on it.
"There is room for other players," said Michael Fordham, an account executive with Franklinton Financial Services, a unit of Cleveland-based National City Corp. that does private-label business. "It's a high-growth field with a large demand on the part of retailers for a third party to handle this business."
Option of Co-Branded Card
Observers said there are a number of reasons for the automaker to enter the field.
Aside from the profit potential and opportunity to diversify its assets, Chrysler may see it as a stepping-stone to issuing its own credit card.
Chrysler could issue a co-branded credit card, banking on a success similar to the AT&T Universal card introduced in MasterCard and Visa versions last year. Subaru has a similar private-label program with Banc One Corp.
For those same reasons, industry executives say General Motors Acceptance Corp. is thinking about entering the private-label business.
Chrysler decided against developing its own computer software and expanding its computer facilities to handle the new private-label business. The system from Credit Card Software Inc., which is based in Maitland, Fla., will run on computers at Florida Informanagement Services in Orlando.