Plastic Fantastic: the rise of credit cards

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Plastic Fantasticthe rise of credit cards

• Dr Keri Davies
• Department of Marketing
• University of Stirling

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• In short, credit cards demand consideration
  because in a variety of ways they represent
  something unique in the history of value
  exchange.
• (Ritzer, 1995, p.25)

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Something entirely new in the History ofEconomic
Exchange

• Credit cards create money - a function
  reserved previously for Government (?)
• Limitless possibilities for spending
• Lack of anonymity when purchasing (indeed
  generally need authorization by a third party)
• Not available to all - specific groups preferred

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A Brief History 1 - Fragmentation

• Prior to 1914 credit cards a rarity
• 1936 - Seattle retailers experimented with a
  scheme
• Oil, hotels, airlines - experiments to the mid
  1950s
• revolving credit introduced in the 1930s
• interest free period introduced in the 1950s

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A Brief History 2 - Unification

• The rise of the UNIVERSAL credit card
• Diners Club 1950
• BankAmericard (became Visa) 1958
• American Express (AmEx) 1958
• Master Charge (became Mastercard) 1966
• in UK
• Barclaycard 1966
• Access (became Mastercard) 1972

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Universal Credit Card -Distinctive Features

• Not tied to one vendor ie can be used in many
  different outlets
• Not tied to one product base
• Not restricted geographically - the world is
  your oyster AND can be used over telephone,
  electronically, etc
• Issuers are in it for profit NOT sales increases
  (compare with loyalty cards)
• UBIQUITOUS

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A Brief History 3 - Segmentation

• The Entry of the NonBanks Sears, ATT, MS,
  Tesco
• Co-Branded Cards both sponsoring company and
  credit card (link to loyalty) e.g. GM Visa, KLM
  Visa, Co-op Visa
• Affinity cards charity (Mencap/ Cancer
  Research) lifestyle (RSPB/ Greenpeace/ Amnesty
  International) personality (Man. Utd/ Rangers)
  organisations (University of Stirling

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University of Stirling Credit CardIncome and
Expenditure (to 1999/2000)

• Costs
• Nil - Beneficial Bank runs the scheme
• Income
• 4 for every card issued
• 20p-25p for every 100 of expenditure using card
• Expenditure (Appeal Fund Income)
• GA small research awards (2k)
• sponsoring students association welfare
  handbook
• shower conversion in hall for disabled use
• two 500 scholarships for non-EU students
• small projects in Stirling community
• (Source Graduates Association)

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Affinity Benefits paid out(to 1999/ 2000)

• The Leeds Permanent (now part of Halifax)
• 5m since 1989
• The Co-operative Bank and RSPB
• 1m since 1989
• The Open University
• 0.5m since 1989
• The GM Card
• 8,500 new car sales since 1994

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The Technological Imperative

• Automation and routinisation of transactions
• Automation and routinisation of applications
  (credit scoring to make judgement on applications
  easier)
• Electronic Funds Transfer/ Automated Clearing
• Smart cards, debit cards, electronic purses
  (Mondex)
• Payment mechanism - telephone and internet
• CREDIT CARDS AS A MEANS NOT AN END

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Plastic Fantastic A Means to an EndSome Examples

• British Airways Executive Club
• Air Miles and Partners e.g. car hire, hotels,
  etc
• Marks and Spencer Chargecard (MS as bank)
• finance - provided a means to let customers make
  high value purchases before MS allowed credit
  card sales
• retail extension - provided information on
  customers that allowed new product development to
  proceed
• Tesco Clubcard
• targeted loyalty through use of customer data

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Marks and Spencer Store Card

• Strengthen consumer loyalty
• Extend store and company profitability
• Provide management information
• Brand extension
• direct marketing e.g. sending out mail or
  catalogues, sending material by season, need, etc
• financial services e.g. savings, insurance, etc

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Tesco Loyalty Scheme

• Tesco Clubcard
• Dividend based system (money back) plus coupons
  for money-off purchases
• Extension to Tesco petrol sales operation
• Cross-link to BQ allows points to be transferred
• Linked to Tesco as bank and provider of financial
  services

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Tesco Loyalty Card
Mother Baby Club
Student Card
Tesco direct
Database Targeting
Tesco Relationship Marketing
Tesco Financial Services
Promotion Vouchers
Tesco Customized Magazines
BQ stores - BQ discounts and holidays
Customer Research
Personal calls from manager
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The End

• Database marketing
• Using the database to provide finance/ sell more
  to existing customers AND to find profitable new
  customers
• others dont have to see YOUR offer - not mass
  market
• this requires -
• Personal Information
• but issues of data confidentiality and security
  as well as consumer resistance to use of personal
  information
• Customisation and Personalisation
• aim though is individual offers and individual
  service