The economy may be showing some signs of recovery, but the credit card industry still hasn't figured out a way to boost its revenue.
The industry's total revenue fell 5.5% in 2011 to $154.9 billion, down from $163.9 billion a year earlier, credit card advisory firm R.K. Hammer said on Tuesday. Hammer's analysis combines the estimated revenues of all U.S.-issued general-purpose and private-label credit cards.
The financial crisis caused many consumers to cut down on their credit card use, causing revolving debt to decline over the past two years. Consumer borrowing started to grow sluggishly by the end of 2011, but credit card issuers are still facing regulations and other obstacles in rebuilding their revenues. For example, the sweeping 2009 Credit Card Accountability, Responsibility and Disclosure Act restricted issuers' ability to raise interest rates and charge fees.
Credit card issuers are considering layoffs and other expense cuts in order to offset these lower revenues, according to Robert Hammer, the head of R.K. Hammer.
"Consumers are spending less, revolving less and being more cautious, which has driven down total receivables and hurt revenues," he says. "That leaves the expense line as one of the few things issuers can control, which inevitably means staff cuts."
Few of the major card issuers are adding staff, and many recently have outsourced more positions to Singapore, Brazil and India, according to Hammer.
He predicts that "about 160,000 bankers will lose their jobs this year as banks cut costs, and a good number of those will be in the credit card area."
Banks and other credit card issuers will rely more heavily on technology to handle card risk-management and operations tasks, he says.
"Technology investments are continuing because issuers have to keep up with competitors, and wherever possible they are automating card-related functions," Hammer says.
Some credit card issuers saw their revenues rise in 2011. But Hammer attributes those outliers primarily to banks that are growing through acquisitions "as opposed to more traditional 'organic' growth."
