Summary of Recommendations
Barclaycard has been the first mover in the UK for credit card services. They have intensely used advertisements as the main method of attracting customers using the message peace of mind to attract their customers to use their cards. However, recently many new entrants have entered the market to drive competition up and reduce the value of each Barclaycard credit cards. The following is a list of recommendations that Barclaycard should implement to remain competitive.
1.Barclaycard can introduce credit cards that have a lower APR to compete with the new entrants. 2.To encourage spending Barclaycard can introduce incentive programs to stimulate spending. For example, they can follow Novus® with a cash back program on spending. 3.Discourage consumers from using cash and a main method of payment. 4.Be the first mover again and introduce other programs that allow a consumer’s life to be easier. For example, they can start implementing services where a consumer can pay with their cell phones using the IR feature, or start emplacing smart card technology in retail outlets as this is seen as the next possible trend in the future. Introduce services that allow consumers to purchase things at home with a touch of a button (internet credit cards e.g. one time use cards)
•Market leadership with a market share of 34% in terms of credit cards issued, and 27% in transaction value. * •Low cost production, resulting from accumulated experience as the first credit card issuer in the UK and economies of scale derived from it high market share. * •Brand status, the Barclaycard name was almost a generic term for credit card and is widely recognized by consumers. * •A well-established distribution network, through Barclays Bank, other financial institutions and large retail organizations which made its product available to a wide range of potential customers.* •IT capability, which allowed Barclaycard to develop improved products through alliances such as British Telecom and Cellnet.* •Strong financial backbone to venture into a new market with the introduction of credit cards. •Saw the opportunities available as credit cards as a new method of payments for goods and took advantage of it. Weaknesses
•Annual transaction value per card is low to NatWest.*
•Barclaycard as a credit card issuer was not international, limited to the UK.* •New credit card issues are susceptible to increased bad debt in the Barclays Bank. •As a new type of payment method Barclaycard must convince critics that uses of such a card is reliable and not susceptible to fraud. Opportunities
•Spending on credit and debit cards amounted to 43% of total retail sales* •Only 54% of UK adults owned credit cards, allowing for increased market penetration* •Technological developments and new products would improve security and flexibility of payment by plastic systems* •Company branded cards and store cards provided access to a base of new users and the opportunity to develop loyalty based tie.* •Short term macroeconomic situation in the UK was positive: real income increasing, low inflation, and strong economic growth.* •Convincing consumers to use credit cards at more retail locations including those where they have not traditionally used other methods of payments e.g. checks •Allowing consumers to use the ATM when they need a short-term loan. Threats
•New entrants such as industrializing societies offering similar products.* •Low annual percentage rate cards being offered by new entrants.* •Cannibalization of the credit card market by debit cards and electronic purse (smart) cards.* •Increased availability of other forms of credit.*
•Increased opportunities for potential credit card fraud.* •Reliance on electronic communications, effect of a breakdown in national communications.* •Identity theft
Analysis of SWOT
The strengths of...