Credit card executives have reasons to be optimistic about the future as the economy continues to improve and credit card defaults are dropping. Smart phone technology systems may also deliver increased future revenue, and fears of new rules to limit revenue from debit card transactions have eased.
Recent Roadblocks : Credit cards execs aren’t letting recent regulation changes get them down. The Federal Reserve, which was initially set to pass the Durbin Amendment in April as part of last year’s Dodd-Frank financial reform law, delayed the law back in March. This is due to the high volume of comments they received regarding the new amendment. The amendment would limit the amount banks can charge merchants on debit card transactions, reducing their revenue by an estimated $13 billion. Bankers and credit card execs are hopeful of the law being repealed or at least delayed for two years, as Senator Jon Tester’s proposal pushes for.
Another roadblock in the credit card industry has been the credit card reform act passed in 2009, which protects the rights of consumers and places certain restrictions on banks, such as hidden fees and interest rate changes.
The Road Ahead: Despite these recent roadblocks, credit card execs are looking ahead with optimism.. Payment processing through mobile phones looks as though it could be a potential revenue booster in the future. Banks are particularly eager to expand mobile technologies to developing countries that do not regularly use debit or credit cards. Last week at an annual credit card industry conference hosted by SourceMedia, Citigroup and American Express executives focused on these technological initiatives, according to Reuters.
The Conference: About 750 people attended last week’s conference, including employees of Bank of America Corp, JPMorgan Chase, Citigroup, American Express, MasterCard Inc. and Visa Inc. The conference saw its best attendance since 2008.
Things are finally looking up for the credit card industry as losses from consumer defaults trended lower or remained steady in February for three of the five major credit card issues.
Bank of America reported that defaults were down to 8.84 percent of outstanding loans, vs 9.2 percent in January and its all-time high of 14.53 percent in August of 2009. American Express defaults held steady at 3.8 percent of balances in January and February and Capital One saw a nice decline from 6.79 percent in January to 5.91 percent in February..