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If some banks decide to drop their credit card programs because of card-industry reforms scheduled to take effect next year (CardLine, 5/27), could such moves lead to the creation of monoline issuers eager to take over their portfolios? Not likely, contends Richard Vague, who co-founded former monolines First USA and Juniper Financial Corp. Vague, now chairman and CEO of Energy Plus LLC in Philadelphia, agrees that the industry "definitely has moved into a new phase," but he says the climate today is not as conducive for monolines as it was when they prospered. "In the late Eighties and early Nineties, you could get a new account through marketing efforts at a pretty low cost, less than $50 an account," Vague says. "In today's world, the cost to acquire a new account probably is $100 if not several hundred dollars. ... So you might actually reduce shareholder value by acquiring a new account." Visa and MasterCard are quick to point out the low-risk benefits their debit card products offer, Vague says, citing credit card transactors who pay off their balances each month as being equally attractive because of their relative low risk. "That's where [the card brands] see the business going," he says.
