Implosion of Plastic?
Will it happen?
I’m wanting to go way out on a limb and predict the end of credit cards as we know them. I want to, but I can’t seem to find that last bit of common sense in the credit card industry that might actually make it happen - they’ll just keep keeping on in spite of themselves. But I can tell you that in any other industry that was as business unconscious as the card companies, prediction of imminent doom would be easy.
Consider this
Visa and MasterCard will proudly boast that the online credit card fraud rate has remained steady or declined ever-so-slightly over the past 3 years. Independent polls seem to be in that ball park too. There’s a problem - Online sales have increased at the rate of 30% a year, making the total dollars lost to fraud increase at 30%. All this is going on while Visa and MasterCard are touting their Verified by Visa(R) and SecureCode(R) as the best thing that ever happened to online merchants. You won’t see all three of those facts in the same paragraph anywhere else.
In the last few weeks the UK press has been flooded with reports that the CNP fraud rate over there has increased as much as 30%! Remember the UK? They are the folks that have chip and PIN to reduce credit card fraud! The picture there is considerably worse than the US.
Downward Spiral?
I’m not a financial expert but take a look at the credit card industry itself. Visa and Mastercard look a bit a bit better on the surface; They seem to be holding their own. But remember that those guys are not credit card issuers, they are just an association.
This week American Express posted a Q2 profit that fell 38%. AmEx is a credit issuer and they’ve been heading for the bottom for quite while.
The rest of the major issuers aren’t doing all that well either. People are heavily in debt, and with the economy going in the direction it’s going (think swirling down the toilet) there’s going to be more defaulting on cards than ever. But still the issuers keep up their predatory lending practices and target their marketing to the people that can least afford to repay their 20%-30% interest rates.
Merchants are fed up. Fraud is sky rocketing. Interest rates on cards is through the roof. Default on card accounts is high and growing.
Something’s gonna bust!
