What price loyalty? A fresh look at loyalty programs in the credit card industry

There is controversy about the effects of loyalty programs in the customer relationship management literature. Although some managers and researchers believe that customer loyalty created through loyalty programs leads to higher firm profits, others have found evidence that loyalty programs do not have a positive effect on firm's profits. In this article, we present our findings regarding the effect of reward cards and affinity cards on customer profitability in the context of credit card industry. We find surprising evidence that customers who own either a reward card or an affinity card generate significantly less profit than those customers who do not have these cards. Equally puzzling is the fact that these customers also have lower average lifetime with the firm. This leads us to a puzzle as to why these practices are widely prevalent in the industry. We find that loyalty cards provide value to the issuers in terms of risk management. They serve as a mechanism to reduce the risk associated with more profitable customers by attracting less risky customers. Thus, through loyalty cards the financial institution is able to balance out the total risk of the portfolio of customers by acquiring customers, who although less profitable, are less risky.     

城市公共交通一卡多用系统技术选择评价

本文在总结各种智能卡技术特点的基础上,详细分析了各应用业务对IC卡技术的要求,表明IC卡技术应根据实际城市应用环境进行选择.建立了基于S图法的城市公共交通一卡多用系统技术选择综合评价模型,并应用该模型对某市城市公共交通一卡多用系统IC卡方案进行比选,得出地铁IC卡综合评价值最大,适宜作为该城市通卡介质.     

Price,quality, and reputation: evidence from an online field experiment

We examine the link between price, quality, seller claims, and seller reputation in Internet auctions. After purchasing actual baseball cards and having them professionally graded, we find that some buyers in the online graded market are misled by incredible claims of quality. They pay higher prices but do not receive better quality and, in fact, are defrauded more often. Online seller reputation is effective for identifying good‐faith sellers. But conditional on completed auctions, reputable sellers do not provide better quality. Evidence also suggests that high‐claim sellers target less‐experienced buyers. We attribute these patterns to two loopholes in the eBay rating system. We benefited from the comments of Austan Goolsbee, Raphael Thomadsen, John Shea, Dan Vincent, David Reiley, Larry Ausubel, Peter Cramton, V. Joseph Hotz, Jeff Smith, Jimmy Chan, Vincent Crawford, Mark Duggan, and attendees at numerous seminars and conferences. We are particularly grateful to Seth Sanders and John List for their constructive advice at the early stage of the research, to Timothy Bresnahan, Rachel Kranton, and Thomas Hubbard for their detailed suggestions in reshaping earlier versions, and to Editor Ariel Pakes and two anonymous referees for their careful readings. Special thanks to eight friends who acted as our agents in purchasing baseball cards in retail markets, and to numerous sports card store owners who shared their insights on the sportscard industry. Excellent research assistance from Randy Alexander Moore and Krzysztof Fizyta is gratefully acknowledged. Any remaining errors are ours.     

Financial literacy and shrouded credit card rewards

Credit card companies charge an interchange fee for each transaction, and almost half of this fee is returned to consumers in the form of a reward or perk program. Among credit card users who do not use cards for borrowing (convenience users), rewards are a means to negotiate the implicit price of the interchange fee. Any consumer whose time cost is less than the value of rebates should rationally choose a reward card. Half of convenience users do not own a reward card. We hypothesize that credit card companies segment customers by marketing non-salient credit card characteristics to appeal to naïve consumers while offering lower-price cards (net the rebate) to compete for more sophisticated consumers as suggested in Gabaix and Laibson (2006). Consumer sophistication is measured using a 20-question financial literacy instrument in a large national data set. When household characteristics such as education, income and wealth are controlled in a multivariate analysis, respondents in the highest financial literacy quintile were twice as likely to own a rewards card. The relation between literacy and reward cards provides evidence that credit card rebates resemble other markets where hidden product attributes create a welfare transfer from naïve to sophisticated consumers.     

College students and credit card companies: Implications of attitudes

More knowledge and understanding is needed regarding the mechanisms influencing college student attitudes toward credit card companies and the behavior that students exhibit using credit cards. Prior literature in the area has been sparse. The current article is an attempt to fill the gap in existing literature. Using survey data, we try to find the determinants of college student attitude toward credit card companies and the responsible use of credit cards. Our findings indicate that a strong positive link exists between student attitude toward credit card companies and responsible credit behavior. Two distinct groups of students are identified – one with a positive attitude toward credit card companies and positive credit use behaviors; the other with the opposing attitude and behavior. Reward cards, payment behavior, number of credit cards, modes of acquisition, awareness about credit card policies, purpose for using credit cards, impulsiveness and certain student characteristics are all indicated as variables that help discriminate between the two different student groups. Our findings have implications for both higher education institutions and credit card firms.     

Optimal pricing of payment services

Payments are increasingly being made with payment cards despite the fact that the cost of clearing a card payment usually exceeds the cost of transferring cash. We examine this puzzle through the lens of monetary theory. We consider the design of an optimal card-based payment system when cash is available as an alternative means of payment. We find that a feature akin to the controversial “no-surcharge rule” may be necessary to ensure the viability of the card payment system. This rule states that merchants cannot charge a customer who pays by card more than a customer who pays by cash.     

信用卡套现行为的法律性质分析及建议

随着我国信用卡产业的迅速发展,信用卡在使用过程中也凸显诸多问题,信用卡套现便是其中之一。然而,对于信用卡套现的法律性质,学术界一直存有争论。从信用卡套现的概念和原理出发,层层分析揭露信用卡套现的深层原因,并以此窥视我国现行信用卡相关立法的不足,并在借鉴美国信用卡立法模式的基础上,对我国信用卡立法提出了建议。     

Credit card ownership and usage behaviour in Saudi Arabia: The impact of demographics and attitudes toward debt

Because of the Islamic prohibition of interest, in Saudi Arabia, there has long been a debate about the acceptability of owning and using credit cards. Available industry statistics, however, suggest that card ownership and usage may be on the rise. In this study, we empirically examine the extent and nature of credit card ownership and usage in the country, and how these are impacted by consumer demographics and attitudes toward debt. Using data from a structured survey, we find inter alia that credit card penetration in the country is relatively low, female Saudis are more likely than males to own the cards, card usage tends to be selective, attitude toward debt is a significant determinant of card ownership but not usage behaviour, and evaluation of card attributes is fairly positive among cardholders. Theoretical, managerial, and public policy implications of the findings are discussed.     

Pricing of payment cards, competition, and efficiency: a possible guide for SEPA

This paper analyzes equilibrium pricing of payment cards and welfare consequences of payment card competition. In particular, we model competition between debit and credit cards. The paper argues that optimal consumer and merchant fees must take safety, income uncertainty, default risk, and the merchant’s handling cost of cash into account. Market segmentation where debit and credit cards serve different merchant segments yields a preferred “payment mix”. However, when markets are segmented, payment card fees do not necessarily reach their socially efficient levels. Hence, thoughtful regulatory intervention regarding merchant fees may still be necessary to raise total surplus.     

Did a Public Campaign Influence Debit Card Usage? Evidence from the Netherlands

Did consumers change their payment behaviour after being exposed to a public campaign that encouraged them to use their debit cards more often? We analysed the impact of such a campaign that started in 2007, using debit card transaction data between 2005 and 2013. The overall results show positive effects of the national campaign to promote debit card usage, both in the short and in the long run. The results suggest that high campaign intensity aimed at consumers had a positive impact, as did a focus on certain large retail chains. Interventions aimed at increasing debit card acceptance by retailers were effective to some extent. Providing information to retailers about the benefits of debit card acceptance led to higher card acceptance, but no proof was found for the effectiveness of financial incentives for retailers.     

信用卡、风险应对与城镇家庭股市参与

信用卡市场的发展有利于家庭平滑消费,但是否会影响家庭的投资决策尚缺少事实检验。基于中国家庭金融调查(CHFS)2011和2013年的调查数据,本文首次检验了信用卡对城镇家庭股市投资的影响。研究发现:(1)控制家庭财富、融资渠道、社会资本等特征,持有信用卡在边际上促进了家庭的股市参与率,股市投资额取决于信用额度。(2)中国信用卡市场的发展,并未像流动性约束理论预测的可以平滑消费,反而刺激了家庭风险性资产的配置,最终提高了储蓄率。原因在于,中国家庭更多地将信用卡作为应对未来短期突发性风险的金融工具,从而在当期将更多资产配置在风险资产上,以实现资本积累。使用信用卡数目、信用额度等多种衡量方式,并采用工具变量法(IV)和面板数据固定效应模型等解决内生性问题后,该结论稳健。该研究有助于理解信用卡在中国家庭投资决策的作用,并为流动性约束或有限股市参与假说提供中国经验。     

Acquisition,affinity and rewards: Do they stay or do they go?

Customer relationship management seeks to understand how to generate profitable customers who enter into a long-term relationship with a firm. In this paper, we examine the role of modes of acquisition and retention programmes on customer lifetime in the context of a credit card issuing bank. While other papers have studied retention programmes such as loyalty card and reward card, there is no published study in the credit card context. Using a rich data set on nearly 5,000 customers observed over a three-year period, we are able to provide detailed insights about the efficacy of these strategies. We show that affinity cards customers and customers acquired through direct mail have longer lifetimes. We also find that reward card programmes generate customers with a shorter lifetime. Finally we re-examine the link between long-life customers and profitability and find that the relationship is weak, consistent with recent findings.     

EMV认证的实现

首先简要介绍EMV认证是全球公认的统一标准,金融系统设备招标的必备条件。加之目前的磁条卡存在很多漏洞,出现很多所谓的“高科技”犯罪案件,所以磁条卡向智能卡过渡是必然的趋势。然后介绍了EMV认证中读卡机具非接Levell各个部分的实现。     

Socialization and processing effects on comprehension of credit card advertisement disclosures

This study examines how college students comprehend the disclosures in a credit card advertisement through two main perspectives: socialization and processing. The results reveal that socialization and processing influence college students’ comprehension of the disclosures differently. In general, message involvement with the disclosures may enhance comprehension of the disclosures positively. However, college students’ experiences in using a credit card, enhanced by information search and number of credit cards owned, may have an inverse and negative effect on comprehension of the disclosures. While female students tend to exhibit more experiences in using a credit card, male and female students comprehend the disclosures to the same degree. This also suggests that female students may be more susceptible to ignore the disclosures, whereas an attended and informed card user provides the best defense against costly mistakes in neglecting important disclosures in credit card solicitations.     

Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands

In card payment systems, no-surcharge rules prohibit merchants from charging consumers extra for card payments. However, such rules are prohibited in the Netherlands. Dutch retailers are allowed to surcharge consumers for debit card use. This setting permits an empirical analysis of the impact of surcharging card payments on merchant acceptance and consumer payment choice. Based on consumer and retailer survey data, our analysis shows that surcharging steers consumers away from using debit cards towards cash. Half of the observed difference in debit card payment shares across retailers can be explained by this surcharge effect. Removing debit card surcharges may induce cost savings of more than EUR 50 million in the long run.     

Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response

Debit card use at the point of sale has grown dramatically in recent years in the United States and now exceeds the number of credit card transactions. However, many questions remain regarding patterns of debit card use, consumer preferences when using debit, and how consumers might respond to explicit pricing of card transactions. Using a new nationally representative consumer survey, this paper describes the current use of debit cards by U.S. consumers, including how demographics affect use. In addition, consumers' stated reasons for using debit cards are used to analyze how consumers substitute between debit and other payment instruments. We also examine the relationship between household financial conditions and payment choice. Finally, we use a key variable on bank-imposed transaction fees to analyze price sensitivity of card use, and find a 12% decline in overall use in reaction to a mean 1.8% fee charged on certain debit card transactions; we believe this represents the first microeconomic evidence in the United States on price sensitivity for a card payment at the point of sale.     

The CARD Act and Young Borrowers: The Effects and the Affected

We study a new law that restricts credit to individuals under age 21. We first use a difference‐in‐difference approach to estimate the effect of the law on credit card availability. Following the passage of the law, individuals under age 21 are 8 percentage points (15%) less likely to have a credit card, have fewer cards, and, conditional on having a card at all, are 35% more likely to have a cosigned card. We then use data from before the passage of the law to identify the characteristics of those individuals most likely to be affected by the Act.     

Did the Health Card Program Ensure Access to Medical Care for the Poor during Indonesia's Economic Crisis?

The Indonesian Social Safety Net health card program was implementedin response to the economic crisis that hit Indonesia in 1997,to preserve access to health care services for the poor. Healthcards were allocated to poor households, entitling them to subsidizedcare from public health care providers. The providers receivedbudgetary support to compensate for the extra demand. This articlefocuses on the effect of the program on primary outpatient healthcare use, disentangling the direct effect of allocating healthcards from the indirect effect of government transfers to healthcare facilities. For poor health card owners the program resultedin a net increase in use of outpatient care, while for nonpoorhealth card owners the program resulted mainly in a substitutionfrom private to public health care. The largest effect of theprogram seems to have come from a general increase in the supplyof public services resulting from the budgetary support to publicproviders. These benefits seem to have been captured mainlyby the nonpoor. As a result, most of the benefits of the healthcard program went to the nonpoor, even though distribution ofthe health cards was propoor. The results suggest that had theprogram, in addition to targeting the poor, established a closerlink between provision of services to the target groups andfunding, the overall results would have been more propoor.     

Consumer payment choice: Merchant card acceptance versus pricing incentives

Using transaction-level data from a three-day shopping diary, we estimate a model of consumer payment instrument choice that disentangles the effect of merchant card acceptance from credit card pricing incentives (rewards) at the point-of-sale. The lack of merchant card acceptance plays a large role in the use of cash, especially for low-value transactions (less than 25 dollars). Participation in a credit card rewards program induces a shift toward credit card usage at the expense of both debit cards and cash. In contrast, changes in the amount of rewards (ad valorem) has a small or inelastic effect on the probability of paying with credit cards. Our findings highlight the importance of the two-sided nature of retail payment systems and provide key insights into consumer and merchant behaviour.     

浅析高校内证卡使用问题及其解决措施

证卡和票据曾经是高校内身份识别和消费的主要方式,现介绍高校内现有证卡和票据使用现状及存在的问题,分析其原因,提出基于校园一卡通系统的解决方案,总结了使用效果,并对下一步工作进行了展望。