GE Unit Targets Growth with a Broad Brand Strategy

  Mark Begor, president and CEO of GE Consumer Finance-Americas, the card-issuing arm of General Electric Co., says it is testing prepaid cards in the United States and expects to broaden the number of pilots this year. "We do have plans to venture into prepaid cards because it reinforces our ability to have a broad suite of products for our retailer partners," Begor says.
  GE Consumer Finance is a leading provider of card services to consumers and retailers in 50 countries. The Americas region had $31.6 billion in credit card receivables at the end of 2005 and 52.4 million active private-label and dual-card accounts throughout the United States, Canada and Latin America.
  Just three years ago the Stamford, Conn.-based firm primarily was a private-label credit card company. Today it supports a broad range of other financial services, including bank cards and corporate travel and purchasing cards.
  Most of GE Consumer Finance's strength comes from its co-branded, private-label card strategy, as illustrated by such products as the Meijer Platinum MasterCard, the Wal-Mart and Sam's Club Discover cards, and the recently announced Dillard's American Express card. The company now issues cards on the platforms of all four major card brands-AmEx, Visa, MasterCard and Discover.
  GE also has been in the acquisition mode, including Dillard's National Bank in 2004 and the QVC and Belk portfolios last year.
  Cards&Payments Editor Jeffrey Green recently spoke with Begor and discussed with him GE Consumer Finance's growth and market strategies as well as recent industry news and trends that could affect the company's efforts.
  Q. Earlier this year GE announced plans to issue a Dillard's Inc. co-branded credit card with American Express, a move that illustrated GE's efforts to issue private-label store cards and network-branded cards with the same stores. What are the benefits of such a strategy?
  A. It was important for us to provide flexibility for our retail partners to have choice around which brand to use in a co-branded card. That is why we entered into our relationship with American Express.
  Q. In what specific ways has GE becoming an official issuer of all four major card brands helped your card program?
  A. It's all about choice and flexibility for our retail partners. We're a big believer that every customer is different, and every retailer's brand is different. So it's critical to have a very customized and flexible program to help them grow their sales. It gives our retail partners choice. We can work with them to select the brand that best fits their customer base. For example, working with Wal-Mart we both determined that the Discover card was a great fit for Wal-Mart and its customers.
  Q. Do you foresee multiapplication store loyalty cards that include credit, debit and prepaid payment options? Any examples?
  A. We do. We believe having a broad suite of products at the retail level is important because every customer is different and their needs are different. So beyond just products like private-label cards and co-branded bank cards, we're piloting other products like debit cards and prepaid cards. We've got pilots in the marketplace today on both debit cards and prepaid cards.
  Q. How is GE promoting American Express cards, and how might those promotions differ from those associated with other card brands you issue?
  A. The promotion won't be any different for American Express than with the other card associations we work with. But each program is very customized around the retailer and its brand. For example, every one of our card programs has a different loyalty program on it. The J.C. Penny rewards program is different from the Wal-Mart rewards program, which is different from the Brooks Brothers card program. But all of our programs are customized to focus on the retailers' customer base.
  Q. Nearly a year ago, GE became the first issuer to offer a contactless cobranded merchant credit card in a deal with Meijer Stores. In addition to that MasterCard Paypass initiative, how is GE also promoting to merchants support of other brands' contactless initiatives?
  A. So far today the only contactless program we have in place is with Meijer. We believe it's critical to be innovative around card design and technology for our retail partners. Contactless makes it easier to use the card. It's faster for the consumer, and it's faster for the retailer at checkout. We're talking to other retail partners about this technology as well as other types of technologies that make it easier for the consumer to use the card and for the retailer to offer the card.
  Q. GE announced in February it agreed to purchase the private-label card portfolio of Hudson's Bay Co. Several months earlier, Sears Canada sold its card portfolio to JPMorgan Chase. MBNA also is growing rapidly in Canada. What do all these events have in common?
  A. Canadian retailers, like many U.S. retailers, have seen the benefits of partnering with somebody like GE to gain the benefits of scale and marketing, risk management and technology that are difficult to have when you do it yourself. The retailers also get the benefit of using someone else's balance sheet, which improves their capital structure to make other investments. In all cases we've been able to increase the retailers' returns through a partnership with GE Consumer Finance.
  Q. In December, GE bought an equity stake in Mint Technology, which issues prepaid cards in Canada. Could you update us on the progress of that initiative?
  A. We're working with Mint Technology to develop products and programs to bring to Canadian retailers. We've had discussions with our retailers about the products and, looking forward, plan to do some merchant proprietary card pilots this year. This is just another step to provide a broad suite of products to our retailer partners in addition to private-label cards, co-branded bank cards and branded personal loans.
  Q. Does GE have any plans to venture into prepaid cards in the United States?
  A. We do have plans to venture into prepaid cards because it reinforces our ability to have a broad suite of products for our retailer partners, and we would focus on proprietary store-branded cards with network functionality. Our philosophy is that if a retailer wants a product, it will have the partner's brand on it. But to add functionality it could be used at other locations. We're big believers that the retailers' brands should be everywhere we touch a customer. We have some pilots under way in the U.S. that we hope to broaden this year.
  Q. GE has worked with Ikea and Wal-Mart to design self-service kiosks to enable customers to apply for the merchants' store cards. How well are those programs doing, and are more merchants looking to deploy such kiosks?
  A. It's important to make it easy for consumers to apply for credit inside our retailers' stores. The Ikea and Wal-Mart self-service kiosks are great examples of that, where consumers on their own can put in some personal information and instantly receive a shopping pass on that day at that retailer. Technology is critically important to make it easy for consumers to apply for credit and for retailers to offer credit.
  Q. Does GE support the instant issuance of credit cards?
  A. We do it in some other countries, in Asia for example. We haven't identified any specific plans in the U.S., although we'd be quite open to it if it were the right solution for our partners.
  Q. Where do you see GE's biggest card growth internationally? Why are those areas hot markets?
  A. The biggest market in the world is the U.S., so you start there. Outside the U.S. we see opportunities in Eastern Europe, Asia and Latin America. We recently formed a joint venture with a bank in Central America to accelerate our growth in that region.
  Q. It has been eight months since the new bankruptcy law went into effect. What impact did the law have on GE, and have there been any market surprises brought on by the changes?
  A. The industry in general saw some surprises around the number of people that applied for bankruptcy in advance of the law. We saw some of that also. But outside of that small blip it really hasn't had an impact on our business. The financial impact was not material to our business. It was minimal.
  Q. Do you see much continued potential in buying existing private-label store card portfolios as a growth strategy for GE? If so, what retail markets represent the best targets?
  A. We do see big opportunities to continue to partner with retailers here in the U.S. to help them grow their business. Partnering with someone like GE allows the retailer to take advantage of the huge investments and scale that we have in marketing, risk management and technology. We believe that retailers will continue to look for easy ways to grow their businesses by partnering with providers like GE. The retailers who have decided to partner on their card programs have done so to improve their economics and grow their sales. Those are the market factors.
  Q. How has the retail card business changed in the last two years?
  A. There's been a dramatic change. For 50 years, there was only one product that was used at retail, which was the single-purpose, private-label card. Private label is still an important product at retail, but it doesn't fit every consumer. So we've really broadened our business the last three years to have a broad suite of products beyond private label, including retailer-branded bank cards and retailer-branded personal loans. We believe it's critically important to have broad suite of products because every customer is different. The other change that has been quite dramatic is the use of loyalty programs to recognize and reward customers for shopping at a retailer.
  Q. What market changes do you anticipate will occur looking forward?
  A. Five years from now you'll see more products available, more technology around card design, the point of sale and how customers apply for credit. And you'll also see a larger penetration of retailer-branded payments as a result of these changes. Online also is an explosive area for our retailer partners where it's important that you have customized payment solutions for that space.
  Mark W. Begor joined GE Consumer Finance-Americas as chief operating officer in January 2002 and was promoted to president and CEO later that year. While leading the Americas business, he also sits on GE's Corporate Executive Council. Begor joined General Electric Co. in 1980, was named a company officer in 1996 and GE senior vice president in 2005. Before joining GE Consumer Finance, he was executive vice president, chief financial officer and head of business development at NBC. He led all financial and business development activities, including several large acquisitions, for this $13 billion enterprise. He joined NBC in 1998 as chief financial officer. Begor serves on the boards of MasterCard International and Kids in Crisis, a non-profit organization dedicated to protecting children from abuse and family crisis. He has a bachelor's degree from Syracuse University and an MBA from Rensselaer Polytechnic Institute.
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