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Bank of America Corp. says trouble may be ahead for its credit card portfolio. "Largely due to increased unemployment and increased bankruptcies, this portfolio is also experiencing rising delinquencies and losses," Kenneth D. Lewis, chairman, CEO and president, told analysts during a conference call yesterday. BofA charged off nearly $3 billion in managed credit card receivables during the third quarter ended Sept. 30, up 50% from $2 billion during the same quarter last year. Charge-offs during the quarter represented 6.4% of BofA's card receivables, up 173 basis points from 4.67% last year. BofA is focusing much of its loss-mitigation efforts, including tighter account management and increased collections, on California and Florida, where losses to home values also have created higher losses in credit card receivables, Lewis said. Average outstanding card loans during the quarter totaled $186.4 billion, up 8% from $172 billion last year. BofA reported interest income on domestic credit cards of nearly $1.7 billion during the quarter, down 6% from nearly $1.8 billion a year earlier. On cards issued outside the United States, BofA reported $535 million in interest income, up 44% from $371 million a year ago. BofA reported noninterest card income of $3.1 billion for the quarter, down nearly 14% from $3.6 billion last year. Purchase volume on credit cards was $62.7 billion, down 1% from $63.5 billion. BofA did not include detailed profit-and-loss statements for individual lines of business as part of its early earnings announcement yesterday. BofA says it will release that information later this month.
October 7 -
Alternative-payment providers such as PayPal Inc. and Amazon Payments continue to pose a threat to traditional payment methods, according to a study by Boston-based financial research and consulting firm Celent LLC. Though payment cards dominate the $170 billion e-commerce market, buyers use alternative-payment methods for approximately 15% of that volume, according to the report. Card issuers will continue to lose interchange revenue, as alternative payments show no signs of losing market momentum. Celent estimates card brands and issuers stand to forgo $345 million in volume in 2010 and about $1.7 billion in 2015. Alternative-payment methods offer consumers and merchants some advantages over payments cards, according to the report. Personal data security, online-shopping convenience and merchant pricing are significant improvements over payment cards, according to the report. "Consumers share information with far fewer players (when using alternative payments)," report author and Celent senior analyst Red Gillen tells CardLine. "You share your potential information with PayPal and not all the merchants you shop with." Besides these advantages, companies that support alternative-payment methods are giving consumers reasons to want to use their services. For example, they alert consumers they can use PayPal or Google Checkout as their preferred choice to purchase a product. Alternative-payments companies also offer discounts on purchases. And Bill Me Later, which eBay Inc. purchased on Monday (CardLine, 10/6), offers financing terms for certain items. Card brands and card issuers can slow the closing of gap between themselves and alternative-payment methods by working with the companies that accept payment cards as the source of funds, such as Google Checkout, Gillen says. PayPal accepts cards as the source of funds, but it also enables consumers to debit a purchase from a bank account.
October 7 -
Clairmail Inc. is testing a "snooze alarm" for bill payments initiated from mobile phones. The Novato, Calif.-based mobile banking and payment processor offers a mobile bill-payment service it markets as Mobile Lockbox to financial institutions and billers. A key function of Clairmail's service is what it calls "actionable alerts," meaning mobile-phone users whose banks offer the service may respond to alerts with commands to pay bills or just ignore them until later. Clairmail's new service, now in pilot phase, sends mobile-banking and bill-payment users an initial alert about 20 days before a bill's due date, Reetika Grewal, Clairmail director of product marketing, tells CardLine sister publication Cards&Payments. If the customer opts not to pay the bill right away, the service will send another notice a week or two later. This time, it will charge a convenience fee of 25 cents to 50 cents, as set by the financial institution, for settlement that is slightly faster than standard bill payment times. If a customer opts to wait longer, he will receive a final payment alert shortly before the bill is due, with the option of paying a convenience fee, usually between $5 and $10, as set by the financial institution, to expedite payment of the bill. The current pilot is testing the service only for automated clearinghouse payments, but Clairmail hopes eventually to expand the service to debit and credit card payments, Grewal says. Grewal would not disclose an estimated launch date for the service or the fees Clairmail will charge banks.
October 7 -
Credit card delinquencies rose just three basis points during the second quarter ended June 30, to 4.54% of total loans from 4.51% in the previous quarter, according to a report by the American Bankers Association. The credit card delinquency rate was 4.39% for the second quarter of 2007. The association's report defines delinquencies as payments that are 30 days past due. The federal economic stimulus payments earlier this year likely are the reason for just a slight increase in the delinquency rate, according to James Chessen, the ABA association's chief economist. "Having that financial shot in the arm appears to have helped some Americans pay off debt during the second quarter of 2008," Chessen says of the report's findings. "Borrowers are also being more cautious in adding to their overall debt, which is prudent in the face of a slowing economy," he adds. The composite ratio, which tracks eight closed-end installment-loan categories, such as credit card, auto and home-equity loans, rose six basis points, to 2.68% in the second quarter from 2.62% in the first previous quarter. The association attributes that increase largely to home-equity loan delinquencies, which jumped 22 basis points, to 2.56% from 2.34%.
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Datamonitor
October 3
