Development of tactical solutions for the e-credit card issuing industry

Published date05 March 2018
Date05 March 2018
AuthorBojun Fan,Hannah Ji,June Wei,Sherwood Lambert
Subject MatterAccounting & Finance,Accounting/accountancy,Accounting methods/systems
Development of tactical solutions
for the e-credit card
issuing industry
Bojun Fan
College of Business, University of West Florida, Pensacola, Florida, USA
Hannah Ji
School of Accounting, University of Florida, Gainesville, Florida, USA
June Wei
Department of Management and MIS,
University of West Florida, Pensacola, Florida, USA, and
Sherwood Lambert
Department of Accounting and Finance,
University of West Florida, Pensacola, Florida, USA
Purpose This paper aims to developa set of tactical electronicbusiness solutions for the electronic credit
card issuingindustry.
Design/methodology/approach Specically,a strategic credit card issuing (SCCI) model is developed
to analyze e-business in the credit card issuingindustry. Second, a set of tactical solutions is derived on the
basis of the SCCI model. Third, pattern analysis is conductedon the basis of data collected from dominant
credit card issuing companies to further investigate the implementation status on these electronicbusiness
solutionsin the credit card issuing industry.
Findings The ndings show that three categoriesof electronic business solution items can be classied.
The average variabilityof electronic business implementation patterns for business-to-business, business-to-
customer and business-to-internal in each company shows a variety of electronic business strategies
implementedby these dominant companies.
Originality/value The results willhelp managers and executives when they make strategicand tactical
decisionson electronic business in the credit card issuing industry.
Keywords Credit card issuing, Electronic business, Strategic value chain
Paper type Research paper
1. Introduction
The economic segment of the general environment in the credit card issuing industry is
advancing as the US economy improves. As the employersand employeesdisposable incomes
are increasing, the number of people who are willing to borrow money for spending is also
increasing on a large scale, which will bring great benets to the credit issuing industry.
Krajewski et al. (2007) mentioned ve developments in the global market that require
companies to formulate effective global strategies. One of the developments is loosened
regulations on nancial institutionsthat focused on the US Governments effort to remove
interest rate ceiling to allow domestic banks to attract more foreign investors by offering
e-credit card
Received14 February 2017
Revised25 February 2017
Accepted2 March 2017
InternationalJournal of
Accounting& Information
Vol.26 No. 1, 2018
pp. 115-131
© Emerald Publishing Limited
DOI 10.1108/IJAIM-02-2017-0014
The current issue and full text archive of this journal is available on Emerald Insight at:
higher rates.On the other hand, foreign banks removed barriers to entry.The authors
stated that the worldsnancial systems became more open, making it easier for rms to
locate where capital supplies,and resources are cheapest(p. 14).
However, Oja stated in Standard& Poors NetAdvantage Industry Surveyfor diversied
nancial services (2014) that currently, nancial markets and their participants face more
regulations(p. 12). Although the development of loosened regulations on nancial
institutionsis debatable, globalization has had a tremendous effect on nancial services
industries, especiallythe credit card companies. Oja also stated that:
[...] credit card companies have generally concentrated on developed markets such as Canada
and the United Kingdom, where cultural attitudes toward credit are most in tune with those of the
US. As these markets have also matured, some companies have expanded to other markets (p. 20).
The other marketsmentionedare nancial markets in some developing countries, such as
China, that lacks proper third-party credit bureaus. Therefore, the problem with the
globalization efforts in credit cardcompanies is the lack of credit bureaus limits unsecured
lending to some extent(p.20).
According to the data and the trend in Carusotto (2014), revenues are the singlebiggest
dollar amount for credit card issuing industry. Industry value added (IVA) is the difference
between the market value of goodsand services produced by the industryand the cost of
goods and services used in production.IVA is also used to measure the industrys
contribution to GDP, or prot plus wagesand depreciation.Enterprise is a division that is
separately managed and keeps managementaccounts.Establishment is a single physical
location where business is conducted or where services or industrial operations are
performed(Carusotto, 2014, p. 39).In other words, establishment is per unit and enterprise
is the total units. Industry revenue in the industry dropped signicantly during the credit
crisis periods from 2008 to 2009. However, IVA dropped even more right before the crisis.
The prot loss should have given a warning to the companies that the crisis is about to
happen. Surprisinglyenough, the wages stayed fairly stable.
The credit crisis from 2007 to 2009 has incurred a detrimental effect on the industry
revenue and customer retention rate. Even after the crisis, credit card issuing industry has
not recovered as fast as some of theother industries because of the elevated unemployment
levels and the consumer deleveraging process(Carusotto, 2014, p. 5). Starting in 2013, the
credit card issuing industry was continuingits expansion process at a growth rate of 0.2 per
cent from 2014 (Carusotto,2014).
Credit card issuing industry focuses mainly on four groups of consumers, including college
students, working professionals, senior citizens and corporations (Carusotto, 2014). The
working professionals group has 60 per cent of the market, whereas college students group
has almost 15 per cent of the market for the industry (Carusotto, 2014). College students are
usually the decit unit in the nancial world because they normally spend more. Due to the
recent regulations on soliciting credit card applications to young adults, credit card issuers
have had to change their focus, directing more attention toward working professionals.
Working professionals are usually enticed by the cash reward program and travel reward
program that either generate more cash for them, or help them afford expensive airline tickets
for business and leisure trips. Most of them have just graduated from colleges and are craving
to spend off their rst paychecks (Jagoda and Samaranayake, 2017).
Senior citizens are a growing market for credit card issuers in the recent years. Senior
citizens have always been thought as the surplus unit in the nancial world, which states
that seniors tend to save more. Giventhe recent price inations on medications and hospital

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