For its return to the credit card business, Wachovia Corp. has set two goals that many observers say will be hard to reconcile: becoming a top 10 issuer and soliciting only its current customers.
Steven G. Boehm, who was named the president of Wachovia Card Services last week, said in an interview that the Charlotte banking company thinks it can do both.
Though it has not said when it plans to crack the top 10, observers expressed skepticism that it could build a portfolio that big without stepping outside its current customer base. Some said the company will need more than banking or brokerage relationships to differentiate itself in the competitive, commoditized credit card business.
According to Mr. Boehm, Wachovia is well aware of the challenges. "We're very excited, but also humbled by the task," he said. "We are in no way thinking we are just going to stroll into" the business and succeed.
Mr. Boehm was the chief operating officer of First Union Corp.'s credit card business before MBNA Corp. bought the business in 2000. (First Union later bought the old Wachovia and took its name.)
He is hunting for credit card talent - specifically, people with expertise in product development and management, customer insight, and promotions, as well as core operations.
Mr. Boehm also said he will bring in employees from other divisions who "really understand how Wachovia works and therefore will know how we can leverage this vertical specialty into the horizontal organization."
It came as little surprise when Wachovia announced this month that it would reenter the credit card business as a direct issuer. It began reviewing its agent banking relationship with MBNA when Bank of America Corp. agreed to buy the credit card specialist in June.
Speculation ensued - and has persisted - that Wachovia might purchase a major issuer, but Mr. Boehm said it would stick to its current customers. "There would have to be some sort of a sea change in our thinking" for the company to change that plan.
Though Wachovia will start issuing its own cards in January, MBNA will continue to handle the back-office work for a while, he said, because Wachovia is not in a rush to build a back office. (He would not say how long his company would work with MBNA.)
"We're interested in creating our own infrastructure but recognize that's going to take time," Mr. Boehm said. Both Wachovia and MBNA "realized that we'd need a transition period, and that's what we've agreed to."
Still, a showdown of sorts is on the horizon. Mr. Boehm said his company plans to go after the card customers MBNA acquired through its relationship with Wachovia. "We're quite hopeful that the vast majority of those customers have other relationships with Wachovia, and we would intend to make those customers aware of our reentry."
Mr. Boehm would not say how it would pursue those customers, except to say Wachovia's customer-profiling and prospecting tools will help it "produce products that they will find compelling."
(A call to MBNA was not returned by press time.)
Industry experts said Wachovia's success will depend on how well it distinguishes its products.
"I see a very difficult path for them to actually differentiate," said Bruce Cundiff, an analyst at Javelin Strategy and Research of Pleansanton, Calif. "They might differentiate on the relationship, but not the product."
Michael Auriemma, the president of Auriemma Consulting Group Inc. of Westbury, N.Y., said Wachovia might be able to build a value proposition around a preexisting banking or brokerage relationship, "but that relationship isn't enough in and of itself."
John Gould, a partner at Prepaid Advisory LLC of Boston, said that even though starting from scratch presents obvious operational challenges, it may also help Wachovia make its offerings stand out.
"Having zero cards out there" would make it easier for Wachovia to incorporate technology like radio frequency identification and biometrics into its cards, Mr. Gould said. "They could do some real cutting-edge stuff."
Mr. Auriemma said Wachovia may also benefit from consumers' willingness to switch from one card to another at any time.
Gwenn Bezard, a research director for Aite Group LLC in Boston, said Wachovia's extensive branch network could be a big help.
"Over the past few years, we have seen some of the major banks have success selling credit cards through branches," he said. "With that, they probably have a good chance to rebuild the portfolio."
But he warned that Wachovia will face stiff competition - particularly from B of A.
"B of A is trying to bring together the issuing and the [merchant] acquiring sides of the business," Mr. Bezard said. "B of A can go to merchants and get deals for its customers in exchange for lower interchange. Larger banks have the ability to change the rules of the game."
