SOURCE: Packaged Facts

Packaged Facts

November 28, 2011 13:34 ET

Private Label Credit Card Industry Must Adapt to Mobile Times

NEW YORK, NY--(Marketwire - Nov 28, 2011) - Private label card spending totaled $183 billion in 2010, down 14.4% from the 2009 level, according to "Private Label Credit Cards in the U.S., 7th Edition," a recent report from market research firm Packaged Facts. The 2010 decline was the largest during the 2006-2010 period both in nominal dollars and in percentage terms, and was primarily due to a continued tightening in program quality by many issuers through closing accounts that had become delinquent or shutting down poor performing programs altogether.

Leading the trend in declining purchase volume were several of the larger issuers. The largest, Citibank, with retail programs such as Home Depot, Sears, and several retail gas companies, reported a purchase volume decline of 20%, though some of the decline was due to the sale of certain programs to GE Capital Retail Finance.

Packaged Facts further estimates that total private label credit card receivables plummeted 18% in 2010. The decline was largely due to charge-offs by issuers, though most issuers noted that consumers had increased payment rates. In addition, lower purchase volume added less to the balance sheets of issuers.

"Private Label Credit Cards in the U.S." reports that Wells Fargo, which focuses mostly on smaller specialty retailers such as furniture stores, saw the greatest decline in receivables. Citibank also saw its private label card receivables fall significantly, as did GE Capital, despite adding $1.6 billion to its receivables balance.

According to David Sprinkle, publisher of Packaged Facts, modest economic growth will be a key factor in the consumer's ability to find additional spending power, the retailer's ability to capture the consumer dollar, and the issuer's ability to balance new accounts with potentially increased credit risk. From a product perspective, private label cards face even more competition in the form of increased purchasing options and the challenge to change with mobile-driven times in order to stay competitive.

Retailers and issuers who want to drive sales through private label programs must not ignore alternative payment technologies, particularly the current belle of the payments ball, mobile. Mobile payments' increases are assured due to a perfect storm of forces: a young, tech-friendly consumer raised on mobile technology, a projected increase in smartphone usage, more ecommerce sites enabled for mobile payments, the development of new shopping apps, and mobile payment technologies such as the near field communications (NFC) which will bring mobile shopping onto Main Street.

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About Packaged Facts -- Packaged Facts, a division of, publishes market intelligence on a wide range of consumer market topics, including consumer demographics and shopper insights, consumer financial products and services, consumer goods and retailing, consumer packaged goods (including foods and beverages, health and beauty care, and household products), and pet products and services. Packaged Facts also offers a full range of custom research services. To learn more, visit: Follow us on Facebook, LinkedIn and Twitter.

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