Case Study of Credit Card Businesses

Running head: CASE STUDY OF CREDIT CARD BUSINESSES
CASE STUDY OF CREDIT CARD BUSINESSES
Name of the Student:
Name of the University:
Author Note:

1CASE STUDY OF CREDIT CARD BUSINESSES
Answer to Q1.
The competitive strategy, which the credit card companies are pursuing is fine-
grained customer profiling. In this strategy, card issuers are able to categorize customers
according to their purchase behaviors. A customer uses his or her credit card for various
purchases and purposes. All of this data is recorded by their card issuers. Card issuers achieve
this by a unique code which of the types of purchases have. For example, bars, grocery stores
and casinos have unique codes. Whenever a card user makes any sort of payment to these
stores, brands or agencies, credit card issuers get the data of the code recorded in their
systems. Using this data, these issuers use insights of behavioral science, to gain insights into
the personality and behavior of the customers. This enables the card holders to stratify and
target these customers in various ways, such as recommending them to purchase from a
particular shop based on their purchasing history, or even categorize them as reliable or risky
customers in terms of debt payment, and impose interests and limits accordingly on them
(Rao, Schaub, and Sadeh).
Information systems perfectly comply with these strategies of the card issuers,
benefiting them immensely. Firstly, the age of digitalization has made recording and storing
data easier than ever before. Secondly, technological advancements like big data analytics
have made it easier for service providers to profile their customers, and target them
accordingly. Thirdly, systems and methods such as behavioral scoring models make it easier
for the service providers to profile customers according to their requirements easily and
effectively (Bennet and Alexandra).
All of these systems put together, make it easy for the card issuers to profile their
customers. The system has already categorized shopping places. Therefore, it becomes even
easier for the service providers to profile the people who shop or make payments to each of
those categories, based on the frequency of doing so.

2CASE STUDY OF CREDIT CARD BUSINESSES
Answer to Q2.
These existing systems benefit the service providers in the following ways:
Product or service differentiation: Card issuers benefit immensely from the data which they
are able to collect as a result of customer profiling, by targeting them with specific and
differentiated services and recommendations. These recommendations are sent out to the
customers on the basis of their purchase histories and behavioral traits, who thereby find the
recommendations useful, and hence, tend to spend more as a result of it. It also helps the card
issuers differentiate between the customers as reliable or risky, thereby being able use their
potential or threats by regulating interests and limits accordingly.
Strengthen intimacy with customers: This strategy also helps card issuers to effectively earn
customer loyalty and satisfaction. This is because the touchpoints based on the customer data
prove to coincide with the interests and habits of the customers. Also according to the case
study, card issuers have also been able to effectively interact with the customers, increasing
their loyalty. Issuers use the purchase history data to interact with the customers, either to
warn them or inform them about the market trends, or on which occasions the customer has
been cheated by a store or an agency, which in turn enhance the intimacy between the
customer and the service provider. This increases customer loyalty, which benefits the brand
by having them clearing off their debts more often than not.
Credit card issuers have benefited immensely in terms of gaining competitive
advantage as well. The practice of targeting according to the customer profiles have enabled
the card issuers to target more specifically. Firstly, it helps them to save a lot of money and
advertisements and promotion, and secondly, the one to one selling method not only
increases brand loyalty in the customers, but as discussed earlier, it also helps the companies