In 1988 British consumers racked up a mere £582m on their credit cards. A decade later, we were slapping down our plastic to the tune of nearly £1.2bn. And, perhaps unsurprisingly, our seemingly insatiable appetite for using our credit cards has been matched by a heady increase in the number of organisations that provide them.
One of the many companies to enter this profitable melee is US-based Capital One. This financial services organisation has 27.1 million customers world-wide, 1.6 million of them in the UK. It has consistently grown at rates exceeding 20% a year, and this phenomenal performance was one of the factors that attracted chartered accountant Fergus Brownlee to the position of Capital One’s chief financial officer for Europe.
Before moving into the financial services industry, Brownlee had spent most of his career in the fast moving consumer goods sector, notably at Mars. So Capital One made a refreshing change. “Big companies like Mars struggle to get into double digit growth in any one year – and certainly nowhere near 20% year after year,” he says.
Publicly at least, credit card companies see no end to this growth. Brownlee points to the US, where credit card saturation has been predicted for many years, and where people hold many more credit cards than we do in Europe – and they’re still collecting.
While Brownlee may have been attracted by the prospect of fast growth, Capital One was interested in the accountant who had worked in a variety of strategic roles for multinationals and whose experience included being responsible for launching the Twix, Bounty and Mars brands into new markets in the Middle East. That broad fmcg experience is destined to have an influence on the direction of Capital One in the UK and Europe.
In common with other financial services providers, Capital One has a wealth of information about its customers, says Brownlee. “We have the biggest Oracle database in the world. We thrive, build and grow on information. It gives us our competitive edge.” The corporation wants to use this data muscle to build its brand and its business.
Perhaps, a year ago, the internet and e-commerce would have figured larger in the vision. Brownlee describes the internet technologies as “phenomenal, if properly used.” But, he adds, it is not everything. He sees a definite move away from an internet-scenario where transactions are done on-line without any human intervention. He says: “It is the equivalent of the move towards superstores where you bought everything once a week and you never went to a corner shop. The internet and superstores will always be there but you need the personal service.”
Backing up that one-to-one contact would be information. According to Brownlee, credit card providers could be after even more information about their customers in future. “People are willing to give information if there is something in it for them. We’re asking the question: ‘What can we give the customer?'” he says.
The reason for collecting more data on customers is an attempt to build customer loyalty. Whenever we choose a chocolate bar, we are more likely to pick up our favourite brand – but the same is not true at the moment of financial services products. Within the credit card industry, members of a certain class of customer are labelled “teaser hoppers”. They are the people who constantly switch credit cards in search of the lowest special or introductory (hence teaser) rate. Perhaps the teaser-hoppers will always be with the credit card industry, says Brownlee, but he insists there is an opportunity for building up customer loyalty.
“We have to remember that our customers are individuals. We can’t just think that we have 1.6 million accounts,” he says. By building up individual profiles (hence the need for more information) Capital One could form a club where members could be pro-actively offered services tailored to their needs. This move would be part of a plan for the centralisation of financial services. “Individuals ought to be able to go to a brand which they trust and obtain the majority of their financial services knowing that they are getting good value for money,” Brownlee says.
And the more people use their credit cards to pay for all their transactions, the more companies like Capital One know about how much individuals are spending on, for instance, various types of insurance. Combining that knowledge with the buying power of a potential client list with 1.6 million names on it and you start to see the sort of deals that could be cut.
Brownlee says: “You could build a brand which means more than just credit cards.” Although whether a financial services company can ever build a brand which is held in as much affection as Mars remains to be seen.
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.
Kevin Reed discusses whether new accountancy group Cogital can rival the Big Four...and its likely direction of travel