The card industry is in a state of flux, and a lack of consensus pervades the industry, according to an impact note issued last week by Aite Group. The analysis is based on interviews (many of them one-on-one) with card executives.

While the group as a whole are evenly split as to the major challenges facing the industry—34 percent say business and the economy, 30 percent cite security and compliance, 30 percent say regulation—there are sharp internal divisions. Credit card issuers are equally concerned by the regulatory climate (39 percent) and the business climate, including delinquencies and charge-offs, reliance on interchange, and reputational issues (39 percent). Data security is much less of a challenge (17 percent).

Debit card issuers are much more concerned with the economic situation (58 percent) and security (32 percent).

Adil Moussa, author of the research piece and an analyst at Aite Group, says card issuers are worried about the Credit Card Users Bill of Rights signed into law late last month.  “They are bracing for those losses,” he notes, “with a mix of things—reintroducing old fees or introducing new ones, increasing interest rates, lowering the value of their rewards offer, or introducing proprietary, richer programs for select users.”

Credit-card issuers have been adding features to their rewards programs while devaluing them at the same time. “Customers are busy looking at the new offerings and don’t notice that the rate of points for every dollar has declined from 3 cents to 2 cents,” Moussa says.

The industry must come to terms with the recession-based stagnation of the merchant pool. Issuers have to focus on wallet share, notes Moussa. Instead of spending $200 to $1,000 on each new merchant, issuers have to ask “what can you do to persuade merchants to encourage their customers to use cards instead of cash.” Moussa suggests creation of a rewards program for merchants “with points toward acquiring new terminals, supplies, or other things.”

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