Posts by Ed Kountz from May 02, 2008

Ed Kountz | May 02, 2008, 10:35 AM
Fee Fairness-Back Again // a Belated Goodbye to the ExpressPay Fob

The perennial discussion of credit card industry fees is on-again, with a bullet, in Washington. Thursday saw the Office of Thrift Supervision roll out a seven-item plan designed to tackle issuer practices it considers unfair. The plan would, among other things, give consumers more time to pay bills and eliminate rate increases and double billing practices.

This follows on a Senate proposal, unveiled by Democratic Senator Christopher Dodd on Wednesday, which combined some of these same proposals with others, including eliminating fees for phone-based credit card bill payments.

Regardless of how these initiatives play out, issuers find themselves facing something of a challenge. Since 1990, penalty, cash advance and other fees (with the exception of annual fees) have come to represent an increasing portion of of credit card industry income, as no-annual fee and zero-percent APR offers became early victims of the industry competition. At the same time, the rise of “payments-plus” products (notably, rewards cards, which give consumers something back beyond the trasaction, in the form of miles, cash, or other perks) have increased costs of maintaining that relationship (though on the other hand, have successfully increased consumer spend in ways unimagined in the days of "standard" cards).

In spite of the challenges, an opportunity exists. JupiterResearch survey data indicate that 86 percent of U.S. online cardholders surveyed would like their primary credit card issuer to explain its fees and policies, according to the 2007 JR Financial Services Consumer Survey. Proactive steps to adapt to the new reality, and better align policies with consumers’ expectations for “fee-fairness” in the process, could offer one of the clearest opportunities to realign market share visible in the U.S. today. The go-go days of the 60s-80s are undoubtedly over, but innovations that tap into that 86 percent would offer access to a clear majority of U.S. cardholding consumers.

On another note, MasterCard reports there are now more than 28 million MasterCard PayPass cards in circulation worldwide, accepted at more than 109,000 merchants in a variety of environments in 24 pilot/ rollout nations.

While progress on the supply-side continues, the U.S. in particular still needs greater visibility around value and usage. Consumers who try, tend to become repeat users. But in many metro markets visibility remains limited, a point I’ve made before and a challenge for widespread U.S. adoption. On that note, a belated RIP to the American Express ExpressPay key fob. While the fob itself never achieved widespread visibility, as a user since its introduction, I found great value in the concept of being able to leave the wallet at home. Form-factor innovation, while obviously not cheap, made ExpressPay the contactless payment option I found most valuable, on-the-go. When my ExpressPay fob becomes inactive in July, I for one will miss it.