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Credit card issuers are developing more rewards offers to try to retain existing customers and attract new ones, a move one observer contends falls short of what is needed to ride out the current economic crisis and regulatory pressures. "What's surprising is that the issuers are not doing anything else" to deal with the poor economy and the current regulatory climate, says Adil Moussa, an analyst with Boston-based Aite Group. Aite surveyed 12 U.S. credit card issuers for its study report "Overcoming Challenges of Credit Card Issuing," which examined the biggest obstacles issuers face today. Issuers cited the Credit Card Accountability, Responsibility and Disclosure Act, which threatens to decrease revenue from fees and interest rates, and the Credit Card Fair Fee Act, which would reduce issuers' interchange revenue. "They are looking at rewards to be the answer to their problems," Moussa says. Issuers should be looking into developing alternative payment options, similar to Bill Me Later, PayPal and Revolution Money, to subvert regulatory pressure and create new forms of revenue, Moussa suggests. Those types of payment products, which cost merchants less to accept than credit cards, are not subject to the same regulatory scrutiny as credit cards, he says.
