DALLAS - He now runs a very small credit card company rather than a large one, but Richard Vague touts the same approach: a monoline model with a lot of cobrand partners that help with the marketing.
His 3-year-old company, Juniper Financial Corp., has $1.2 billion of receivables and 700,000 customers, but it has already signed dozens of cobrand deals, including three with airlines, which are typically the most coveted type of partner.
Mr. Vague, who presided over First USA both when it was an independent monoline and after it was bought by Bank One Corp., said that at Juniper, he has gone up against the biggest issuers for cobrand deals. He has won contracts with Midwest Airlines, Frontier Airlines, and AirTran Airlines, as well as the popular travel Web site Orbitz.com.
He has also signed up some affinity card partners, including the National Arbor Day Foundation, and he says that more than half of Juniper's customers have a cobranded card.
"These partners feel they can get a lot more attention from senior management, as opposed to just a program that we offer every time we are out," he said in an interview at the American Bankers Association's Bank Card conference here this week.
Three years ago Mr. Vague left the helm of First USA, which then had 57 million cardholders and $70 billion of loans, to start Juniper with a mere $20 million of venture capital. Juniper has grown at a 90% annual rate since then, but it is still a shrimp by issuer standards.
And that's the way he likes it.
"The bigger you are from a marketing standpoint, the higher your marginal cost per account gets," Mr. Vague said.
The fact that Juniper is backed by deep pockets has eased the need to make an immediate profit. Canadian Imperial Bank of Commerce, which has a 51% equity stake, lets Mr. Vague and his team run the business without interference. Though CIBC is Canada's largest Visa issuer, Juniper deals with its venture capital division.
Mr. Vague would not discuss Juniper's profitability, except to say that its trends are improving and that not having to report on such things "is the luxury of being a privately held company."
He did say that nearly all of its customers are prime and that their credit lines tend to be higher than average, primarily because of the high number of airline card accounts.
Despite his position as the head of a small issuer, Mr. Vague remains well known in the bank card industry. He was the lead speaker at Tuesday morning's conference proceedings, and MasterCard recently invited him to join its board. In his First USA days, he sat on Visa's board.
He sees many reasons why niche issuers like Juniper are in a great position right now. "There are only 260 million Americans. If you are a large issuer, you are trying to replace the accounts you lose through attrition, you are already mailing 30 times a year. Mailing that 31st time can't yield that much in terms of incremental accounts, and it is a very expensive account."
And while big monolines like MBNA Corp. and Capital One Financial Corp. are diversifying into other types of loans, Mr. Vague does not intend to. Juniper once offered a variety of banking products and services, but it has switched back to the monoline model.
Ben Brake, Juniper's managing director of marketing, said the Internet bank model just did not work out.
Some customers opened checking accounts, but "we needed a critical mass greater than we could do at the time," he said. "At the time, the Internet-only offering wasn't meeting the needs of the majority of customers."
After around a year, investors asked Juniper to halt the banking side of the business, and it gave its checking account customers a "generous" credit to their accounts and around six months' notice to take their business elsewhere, Mr. Brake said.
For Mr. Vague, who helped create the monoline model, the credit card-only focus is comfortable. "Some issuers are so large it is hard to have a meaningful growth rate, so they have to make choices about other lines of business," he said. "At our size, we can have a strong growth rate for a long time."
Some of his approaches have also changed. First USA was a pioneer in Internet marketing and was among the first to offer online credit card applications, but Juniper does not emphasize applications on its Web site, preferring to use direct mail or to let partners market the cards at their own sites.
"It seems to us that we have always been more successful through partners," Mr. Vague said. "A lot of our accounts come through such conventional means as airport tabling."
Another change involves technology. Mr. Vague said he aims to have no systems older than three years. "We don't have cumbersome spaghetti code, and it creates a tremendous advantage in how quickly and easily you can do things. That has been a big part of the enjoyment."
When he started Juniper, he took most of his management team with him from First USA, and that team's closeness has been helpful, he said. He brought several of his top deputies with him to Dallas, including his marketing director, Ben Brake, and his general counsel, Clint Walker.
Mr. Vague said he enjoys the business now more than ever. "It is harder now and more complex than 20 years ago. That is what makes the business fun."
