Credit-card Profitability


Your client is the president of a bank. The credit card product of the bank has been profitable for the last 15 years. However, profits have declined 25% over the last 3 years. Three years ago profit was $100 million / year. The Current credit card market is saturated.

How to get bank credit card profit back to $100 million / year?
What caused the drop?
How do we counteract it?

What new products can be offered?


How would you structure your investigation and solve the problem?


Getting Customers

Regional Focus – Mid Atlantic & NE – believe they understand the risks associated with this customer group
1/5 customers acquired through the bank branches – signed up during visit 4/5 customers acquired through direct mail

Bank Costs


Cost Per Acquisition (CPA)
Very high – 50% higher than competition
Cost per solicitation is average.


  • What caused the drop in profit?
    • Saturation
    • Competition
    • Substitute products
  • What products are people using?
    • Segments
    • Access
    • Why
  • Where do banks make their money?
    • Revenue
    • Costs
    • Risks

Hit rate is low, the volume is higher.


  • Grow current credit cards in new regions of the country.
  • Offer points or additional products.
  • Use the information to better target customers to lower CPA.
  • Should try and quantify these new markets
    • Can they actually grow revenue by 33% to reach $100 million?
    • Is this where their competitive advantage lies?
    • Should they be in this business?

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