It doesn’t seem long ago that we were speculating about the return of annual fees, the disappearance of teaser rates and the watering down of rewards programs as card issuers attempted to maintain profits in the face of restrictive new regulations. As the dust settles on the CARD Act, we continue to see evidence that this isn’t happening.

Take Discover for example. Discover was one of the first to communicate CARD Act changes to existing customers. However, unlike other top issuers, Discover delayed changing the Schumer Box displayed in its acquisition mail to the newly mandated format, prompting speculation about the issuer’s post-CARD Act strategy.

That all changed this week when I received an offer in my own mailbox for a Discover More card, displaying the new Schumer Box with rates and fees shown separately. Far from being an offer for a card with an annual fee, no teaser pricing and a reduced rewards program, this Discover offer is loaded with benefits. These include:

- a 0% introductory APR on purchases and balance transfers
- a $100 cash reward for making $799 in purchases within 3 months
- 5% Cashback Bonus in certain categories
- 5-20% Cashback Bonus for making purchases through Discover’s online shopping mall
- automatic entry into a sweepstakes to win $1 million every time the card is used for cash or any purchase

The card’s APR of 10.99% to 17.99% and the balance transfer fee of 4% (5% for subsequent transfers) may be off-putting for those looking to carry a balance from month-to-month, but for those who usually pay in full this isn’t too bad.

Furthermore, despite the squeeze on profits, Discover reported strong results in 2nd quarter. In a press release, David Nelms, Chairman and CEO, said “our very strong results this quarter were driven by a significant improvement in the credit performance of our loyal customer base along with continued solid growth in cardmember spending.” He was also optimistic about long term growth.

I’m not suggesting that the CARD Act has left the industry unscathed. Offers are still, for the most part, only being received by households with excellent credit histories. From the consumer perspective, APRs for purchases are higher than in the past and fees for balance transfers have increased on many cards. For issuers, grappling with the new regulations is an on-going challenge that continues to suck up millions of dollars as they figure out how to replace lost revenue.

However, it does appear that the CARD Act is not restricting the industry as much as it was originally thought and consumers are beginning to reap the benefits.

For me the highlight of the Digital Marketing Days Conference held in New York this week—Mintel Comperemedia was a sponsor—was listening to Thomas Hoehn, Director, Interactive Marketing and Convergence Media at Eastman Kodak. In his session entitled “Your Brand Deserves More Conversation,” Thomas showed how Kodak is a leader in social media marketing. As financial services companies grapple with social media, they could do themselves a big favor by looking at Kodak for an example of best practice.

Kodak has transformed itself, in recent years, from being a traditional “film” company into being a “digital” company. This was primarily an issue of consumer perception. After all, when we think of Kodak we think of a “Kodak Moment” – a phrase first used in 1961 which was meant to represent a special memory captured on Kodak film.

However, not many people know that Kodak was a pioneer of the digital camera business and actually invented the first digital camera in 1976. Fewer people know that, because of Kodak’s digital technology, it was able to provide the only television pictures of the Tiananman Square Protests in 1989.

A key part of the Kodak strategy involves social media, and the company stands out as one that has truly welcomed social media into its marketing mix. Kodak produces four blogs—it has been blogging for four years—and is always seeking new and creative ways to utilize the full range of social media tools.

Thomas Hoehn passionately believes that the worst thing consumers can say about you is nothing. Positive and negative comments about your brand, products or category abound in social media and both can provide marketing opportunities.

He handed out a color booklet entitled “Social Media Tips” which has been produced as a guide for vendors and partners of Kodak. The booklet includes Kodak’s social media policies as well and an outline of the company’s “Convergence Media Tactics.” It provides fascinating insight into Kodak’s approach to social media. He also handed out a booklet entitled “Mobile Marketing Tips.” You can download both booklets and review Kodak’s social media marketing efforts at http://www.kodak.com/US/en/corp/ourCompany/index.jhtml?CID=go&idhbx=followus.

To see how Kodak has recently updated its “Kodak Moment” campaign for social media, go to http://www.youtube.com/watch?v=HA9puP2f6Fs.

Thanks to all who listened in on my webinar with Nielsen’s Brian Schlessinger last Thursday (June 10). We experienced audio issues during Brian’s portion of the webinar, so I apologize for any inconvenience.

To make the recording better quality, we’ve re-recorded the webinar (minus the Q&A session). You can access the new recording and the slides here: http://tinyurl.com/2duguqf.

We did have many great questions asked during the webinar and I’ve responded to all of them below. Please contact me at ADavidson@Mintel.com or visit www.comperemedia.com if you have any questions.

Q. I’m curious as to how “Revolvers” were defined by Mintel.
A. Revolvers were defined as those who typically carry a balance from month to month on their primary credit card.

Q. What triggered consumer suspicion about a decrease in teaser rate offers and balance transfer offers? What was different in actual CARD Act that negated those concerns?
A. The new payment allocation rule in which payments, above the minimum due, are allocated to the highest APR balances first caused many to suggest that the industry would not be able to make money from teaser rates and we would see a reduction of teaser rate offers in the mail. This didn’t materialize and, in fact, most offers tracked by Comperemedia promote either a teaser rate for purchases or balance transfers. Issuers have navigated the payment allocation rule by increasing fees for balance transfers with many now charging 4% or 5% of the check amount. They have also increased APRs for purchases despite the low prime rate.

Q. Once these new regulations are fully digested, what do you see as new potential loopholes issuers may take advantage of?
A. In its relatively short history, the card industry has adapted to change successfully. We have already discussed the increase in go-to purchase APRs and BT fees. During the past two years, the industry as a whole scaled back to focus on only the most profitable customers. As competition increases, card issuers will need to continue to be creative to find new ways to promote their products while increasing revenues. Comperemedia will be assessing how they do this in direct mail, email, online and print advertising during the coming months. (Learn more: www.comperemedia.com.)

Q. What do consumers need to watch out for?
A. Consumers will start seeing more offers in the mail as the competition heats up. Terms are more transparent and it is easier to compare one offer with another due to the new Schumer Box format. If they are looking to transfer a balance, they should pay close attention to BT fees and not just the duration of the intro period. In a post-CARD Act world, the better the offer, the higher the BT fee.

Q. What has been the impact of the CARD Act on Small Business cardholders, considering those cards are exempt?
A. Small business cards are exempt and there was some speculation last year that issuers would redirect their efforts towards the small business market. This didn’t happen on a significant scale and volume levels remained comparatively low. Activity did start to pick up towards the end of the year although the pattern in business cards lags behind what we see in consumer. Capital One has been a key driver in recent months along with Chase and American Express. At some point we may expect legislation regarding small business cards.

Q. What forms of media would be best to get the positive PR about the CARD Act out to consumers?
A. Education needs to be on-going and some media are better at communicating on-going messages than others. More recently, financial institutions have turned to blogs to develop an on-going dialogue with consumers. Citi established a new blog (http://new.citi.com) to help rebuild its image in the wake of the financial crisis. Wells Fargo has been cautiously navigating the Wachovia integration through various tools including a dedicated blog (http://blog.wellsfargo.com/wachovia). A more traditional format is newsletters. Statement inserts should also play a key role. As a result of the CARD Act, more consumers are paying attention to their statements and this presents an opportunity for dialogue.

Q. What is the estimated financial loss to the credit card industry as a result of the CARD Act?
A. This will be difficult to calculate. The new regulations came at a time when the industry was already at a low point due to the recession. Signs indicate a return to profits for many industry players.

Q. Will mail volume continue to grow related to the CARD Act?
A. Yes. The recent increase in mail volume is being driven primarily by Chase. Some issuers, such as Bank of America and Discover, are still mailing at relatively low levels which means there is plenty of slack to be taken up. We anticipate acquisition mail volume reaching 3-4 billion this year, up from around 2 billion last year, but still much lower than the 7-8 billion seen during the boom years.

Hi everyone. Tomorrow, with the help of Brian Schlessinger, Vice President of Industry Solutions at Nielsen, Mintel Comperemedia will host a webinar:

“One Year Later: The Impact of the CARD Act”
Thursday, June 9, 2010
2:00-3:00pm CT

It’s been one year since Congress signed the CARD Act into law, forever changing the face of credit card lending in the US. Though many of the new regulations didn’t take effect until 2010, card issuers began communicating rate, fee and plan changes to customers as early as Summer 2009. Despite this communication, many consumers still worry about credit card rates and fees, and many feel underwhelmed by the benefits of the CARD Act.

This presentation will examine:

- How card issuers communicated CARD Act changes to their customers, including which issuers were most successful in getting their messages across
- New trends in credit card acquisition direct mail and email campaigns as a result of CARD Act regulations
- The influence of online buzz and its ability to drive opinions related to the CARD Act
- Consumer awareness and their latest opinions regarding the new rules

I hope you can join us! I’ll be posting the recording and slides here after the webinar, as well as answers to the Q&A. Register for the webinar with this link: http://bit.ly/bKV30m

The CARD Act mandates that consumers must be given the right to opt in for over limit fees. Until now we have not seen how the card industry will address the new rule within acquisition direct marketing. However in March, U.S. Bank made the first move by including an over limit opt in check box on application forms so that prospective cardholders can authorize future over limit transactions.

The U.S. Bank check box is shown on the application form under the heading “Overlimit transaction opt in right.” U.S. Bank (and Elan Financial Services) application forms are attached to the letter or, in some cases, included as a separate acceptance certificate. The fine print for the opt in states that “you will pay one fee per billing cycle even if you go over your credit limit multiple times.” It goes on to disclose that the bank “may still decline transactions that go over your Credit Limit, such as if you are past due or significantly over your Credit Limit.” The bank charges $39 for an over limit transaction.

U.S. Bank also communicated with customers during February and March regarding the opt in, presenting an option to sign up for “overlimit coverage.” Customers can sign up online or by calling Cardmember Service.

HSBC has been the only other issuer mentioning the opt in in its acquisition direct marketing efforts. In March, it outlined the requirement in its “Solicitation Disclosures” insert. Like the U.S. Bank communication, HSBC’s insert describes over limit “coverage,” but unlike U.S. Bank it does not provide applicants with the ability to physically opt in at the point of application. HSBC charges $19 on balances over limit but less than $250 and $30 for balances over $250.

U.S. Bank has taken the lead by adding a check box to its acquisition mail and we are now seeing the new language of “over limit coverage” from both U.S. Bank and HSBC. It is likely that others in the industry will follow as we continue to navigate the ongoing impact of the CARD Act.

Day two of Card Forum in Orlando, Florida and Joe Purzycki, Chief Operating Officer for Barclaycard US, takes the field with “Enhancing Every Step of the Customer Experience.”

His Keynote Session focused on how an effort to create the ideal customer experience has been fundamental to the growth of Barclaycard in the U.S. over the past ten years. It is a fascinating story which takes us from the launch of Juniper in 2000, to its acquisition by Barclays in 2004 and its subsequent break through into being one of the top ten card issuers in the country. At the same time Barclaycard is now consistently one of the top ten acquisition mailers in the US, according to Mintel Comperemedia.

Barclaycard’s strategy has been to focus on co-brand and affinity partnerships, which is not surprising given the background of its senior leadership. Joe managed co-brand and affinity operations at both Chase and MBNA prior to joining the company and has therefore been a key player in this segment for two decades. The company now has more than sixty partnerships including U.S. Airways, Barnes & Noble and L.L. Bean.

The question on my mind though is whether we will start to see Barclaycard emerge as a brand in its own right. Many US consumers are unaware of the company, but in the UK, where it was launched in 1966, the brand is synonymous with credit cards. Joe showed the recently launched Barclaycard “Rollercoaster” ad:

He also showed the much acclaimed 2008 “Waterslide” ad:

Both ads aired in the UK only, but they were also launched on YouTube and Facebook (Waterslide has received more than 500,000 hits on YouTube). Both promote the use of contactless payments as they follow an inner-city commuter on his imaginary route to work via waterslide or rollercoaster. The Waterslide ad was subsequently launched as a game on the iPhone and has reportedly attracted 10 million downloads worldwide.

In March, Barclays quietly broke ground on a new 18,000 seat basketball stadium in Brooklyn, New York that will provide an alternative to Madison Square Garden. The stadium, named the Barclays Centre, cost the British bank $200 million. The move demonstrates a clear intent to build the Barclays brand slowly and steadily in the coming years. It is a smart move as it sends a clear message that Barclays is here to stay. I wouldn’t be surprised if the company was eyeing up an east coast retail bank too and then, one day, we may see offers in the mail for a Barclaycard branded Barclaycard.

Thank you everyone for attending my webinar yesterday on 2010 Banking Predictions, and thank you for submitting so many questions. I’ve answered most of your questions below, so let me know your thoughts!

If you’d like to download the slides or listen to a recording, click here.

Also, if you’re interested in learning more about Mintel Oxygen’s Finance Reports, please email Zach Leahy at zleahy@mintel.com. You can see a list of past and future titles here.

Q. Have you noticed a penetration difference between the $15 incentive and the $50 incentive. What is the optimal figure?

A. The $15 and $50 cash incentives were for increasing debit card usage. Typically on an acquisition campaign we see about $100, although amounts are increasing. For loyalty campaigns, the amounts are lower. The optimal figure is dependent on the total cost to increase debit card usage and the long term profit. Each bank is going to differ in that equation.

Q. As it relates to incentives, do these predictions still apply to non-traditional banks, like Schwab bank and other asset managers looking to acquire new clients and assets?

A. Investment firms are struggling right now with an image crisis. As a result, most investment marketing is focused on regaining trust or convincing consumers that the firm is focused on the customer rather than just on selling products or services. Investment firms typically don’t rely on incentives to acquire customers. Instead they rely on free seminars, webinars, education, etc.

Q. Do you predict any differences in these trends between banks, credit unions or other types of financial institutions?

A. Credit unions and smaller banks are less likely to use cash incentives and more often offer merchandise or the offer to buy back unused checks and debit cards. Across the other trends, however, we see similar types of things. We tried to incorporate examples from all types of banks to illustrate that point.

Q. Who’s going to win, regional or big banks?

A. Big banks are always going to win on the national level. However, while it’s almost impossible for a regional bank to compete with Chase, for example, on a national level, they can certainly compete with the Chase branch across the street.

Q. What banks do you see as having best practices in social media at this point?

A. Since banks are doing so little in social media, none of them really have developed a “best practice.” Certainly Chase was successful in its Community Giving Program that it moved to Facebook. It was a program that existed offline, but in an effort to make consumers part of the decision, the company moved it online. More importantly, Chase did it in a way that allowed Facebook members to participate in a meaningful way.

Q. Have we seen debit card promotions targeted at non-customers?

A. Absolutely. Debit cards are being aggressively marketed in acquisition campaigns. We see this mainly through rewards programs, since rewards are earned primarily through debit activity. But we also see cash incentives for opening a new account tied to a debit card and debit usage.

Q. Any predictions on credit cards as stand-alone products outside of a banking relationship?

A. Companies have recently moved away from this, so I don’t expect a return anytime soon. MBNA was bought by Bank of America and Capital One obtained its banking charter so that it could use deposits to fund its lending activities.

Q. Can you explain how the deposit money app works on the iPhone?

A. The feature works through an iPhone application that customers download from the iTunes Store. When the user accesses the application they are asked for their user name and password. To deposit a check, the customer touches “Remote deposit.” The check must be placed on a dark surface. Then the customer takes a picture of the front and back of the check. While in this mode, green lines are visible so the customer can line up the check correctly. Once both sides are captured, the customer clicks submit and the transaction is complete. A video of the process is available here:

Q: Have you developed any predictions for the future of credit cards?

A. My colleague Andrew Davidson conducted a webinar last September titled “Seven Predictions for the Future of Credit Card Marketing.” If you’d like a copy of this presentation, please email press@mintel.com. His predictions were:

1. Direct mail is coming back
2. There will be more integrated marketing campaigns
3. The brand message will become more important
4. The CARD Act will lead to creative new products
5. The national wallet will shrink
6. The subprime segment will redefine itself
7. The card industry will adapt to the environment

A popular payment method from Korea is coming to America: Visa is currently trialing contactless phone payments in San Francisco, CA. Phones fitted with small memory cards will become ‘electronic wallets’ that make transactions with store payment systems.

Visa, along with Apple, is also investigating applications that will ultimately allow customers to point their phone at an object and purchase it with a simple click.

A lack of technological infrastructure precludes American retailers and phone brands from rolling out contactless payments across the country anytime soon, but this does raise a host of issues. Paperless banking is one thing and the gradual disappearance of cash and checks is widely accepted.

However are cards to enjoy a short lived ascendancy? Will the contactless phone ultimately consume the debit/credit card? The ability for customers to point and purchase makes ‘on demand’ a reality in retail and has connotations of childish, impulsive, impatience.

In the wider retail world, impulsive purchases might be made in response to advertising installations or chip enabled billboards. Contactless phone payments are yet another example of the “right now” mentality that seems to permeate today’s society.

Seeing potential in Canadian market, American Express’s marketing campaigns evolve and integrate

In October, American Express launched a multi-million dollar “Realize the Potential” campaign in Canada. This move is significant as it represents the first major brand advertising from American Express in Canada in almost a year. Developed by OgilvyOne Worldwide, the advertising campaign promised an integrated effort across multiple marketing channels.

Initial print advertisements were captured by Mintel Comperemedia in October. Running through February of this year, the ads take a playful tone to appeal to a younger demographic than is traditionally associated with American Express. Print ads in The Globe and Mail use color on a black background for impact and cleverly spell out the name “Daniel” in numbers. The ad states that “we see you as a person, not a number.” A link is provided for more information about the campaign: www.americanexpress.ca/potential.

Now in 2010, we’re seeing new print advertising. An ad in the National Post simply states “Be a traveler, not a tourist,” as American Express demonstrates that it is more than just a payments card. To create additional impact, ads have also been published in non-traditional shapes and sizes. One seen in February in the Toronto Star is L-shaped and playfully states “Come fly with me…or me! or me!” to demonstrate the flexibility of the Membership Rewards Program given that you can use rewards to fly on any airline.

The print advertisements and digital campaign are now being integrated with direct mail. In February, direct mail offers for the American Express Platinum Card included the “Realize the Potential” tagline, while statement mailings took the same blithe tone as the print advertisements to describe how easy it is to turn points into rewards.

Just last week American Express announced a new Canadian campaign to promote card acceptance at popular merchants such as fast food outlets and drug stores. Combined with an increase in mail volume, these efforts show that American Express is clearly committed to investment in the Canadian credit card market.

A green revolution is underway in the credit card space and American Express is leading the way.

In February, American Express notified corporate cardholders that it was moving exclusively to online statements. The environmental benefits of paperless statements go without saying. Less paper, less waste.

But as American Express touts the “green factor” of paperless billing, it stresses—perhaps more important to corporate customers—that online account management provides increased security against identity theft and unauthorized card usage, as well as providing tools that enhance responsible credit usage and simplify tax preparation and accounting.

Personal and small business cardholders still have the option to receive paper statements through the mail. But as the company increasingly stresses its dedication to data security, fraud prevention, building respect for the environment and reducing its carbon footprint, how much longer might American Express customers continue to have a paper option?