Credit card industry report for the first quarter of 2012

January 10th 2013

More than 59% Americans depend on credit cards as a way of running the month without compromising on their savings or overextending their cash budget. Give how important the credit card industry is to the financial well being of the nation’s population, a comprehensive update of all the happenings related to the credit card companies is essential. The credit card industry has shown signs of growth and recessions over the past few weeks. The following is a short report of the happenings of recent events that analysts think will have an overall effect on the nation’s finance industry.

Visa’s business boom

The first quarter financial report released by Visa Inc. a few weeks ago showed a 16% increase in profits made by the company. This is a clear indication of credit and debit card usage amongst consumers. The net income for last quarter of 2011 went up from $884 to $1.03 billion. Bloomberg analysts have declared that the current earnings per share stand at a healthy $1.45. Visa is also planning to put into effect a $500 million share repurchase program.

The CEO of Visa Inc, Joseph Saunders said that he is setting the grounds for Visa’s next growth cycle after federal regulation put a cap on ‘swipe fees’ which the company charged on debit card purchases.  He also mentioned that Visa is aiming to expand its overseas market and generate more than half its total revenue from those markets. In the last year, Visa’s global network processed 76 billion transactions with a total volume of $5.9 trillion.

In a press release, Visa announced that it would be helping the Republic of Rwanda in their effort to develop their own payment system. The move will help connect the 11 million citizens of the country to the global economy.

Improved credit reporting

Credit reporting agencies (CRA) have started collecting and assembling consumer data like payday loan applications, claim dues, evictions, dues or late payments of homeowner’s association fees. CRAs are analyzing and selling the data to insurance companies, employers, lenders and renters who are willing to pay for access to such information. Collection and consolidation of financial and semi-financial data by the CRAs have started to force consumers into taking better care of their credit report.

Citigroup continues downsizing employees

Citigroup is going to be spending $400 million dollar by the fourth quarter of this year to cover severance and downsizing costs for 4,500 employees. The Chief of Citigroup, Mr. Vikram S. Pandit spoke at the Goldman Sachs financial service and projected the downsizing effort as a part of his plan to brace the company for harder times ahead.

The number of employees was already down by 100,000 from 2007. Citigroup’s employee strength would stand at 262,500 after the move and most of the downsized employees will be from the back-office and investment banking operations. The 4,500 jobs designated to be downsized would mean a cutback of 2% but the board of directors is hoping that the spending cuts would help them regain some semblance of financial stability.

‘Digital Wallet’ wars escalate

Near field communication based mobile payment technology is set to take the lead in the ongoing digital wallet wars as Visa and Samsung declare to jointly introduce this technology during the 2012 London Olympics. The two companies are baking on the sheer number of attendees the event will attract to advertise their product. The battle for supremacy in the digital payment market continues to heat up. Major players like Google, Verizon, Apple, Visa and Paypal speed up their technology development process and fight to maintain exclusivity on their respective platforms.

Credit card security increases

A recent financial crime spree has set consumers, cops and lenders on high alert. An automated call informs the consumer that their credit card is locked and they are required to punch in the card number on their phone’s keypad in order to unlock the cards. Most unsuspecting consumers end up doing as instructed and become victims of scammers.

An industry expert says “Chip-and-PIN cards are the next step in electronic transaction security.” The technology is slowly gaining momentum in the market and it would protect card holders and issuers against card-present frauds as well as card-not-present (CNP) scams.

Credit card rates holding steady

Amongst the 1060 credit cards advertising their rates in the United States, the average cash advance rate for this week is holding steady at 21.52%, remaining unchanged since last week. The average percentage rate or the APR on credit cards currently stands at 14.25%, down from 14.47% last week.

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