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Credit card issuers bank on online services for growth Tuesday, 19th February 2002 - Online services are the key to meeting revenue and customer service goals, according to a survey of the UK’s credit card issuers from iE, the leading provider of e-business applications to the cards industry.

Three quarters of card issuers continue to regard online services as critically important both in generating sales and in building relationships with the customer. Their faith in online services also remains as strong as ever despite the economic downturn and the bursting of the dot.com bubble. Most issuers say their plans to invest in e-business have not been affected and in a fifth of cases spending has actually risen. Respondents to the survey, conducted for iE by Byline Research, account for around 90% of the 45 million cards issued to UK consumers. In the report of the findings, the authors note that while issuers continue to use low-interest rates, cash-back schemes and other gimmicks to win
customers, they recognise that they do little to secure loyalty or long-term
profitability. Helen Clulow, Director of Cards for iE, said: "The UK is the most dynamic market for credit cards in Europe but also the most crowded. Product discounting cannot go on forever. By moving the battle to the Internet,
issuers see a way to increase sales and keep customers onboard for longer by
offering them a wider and richer selection of services."

Although issuers continue to see e-business as a way to reduce costs, growth
not cost-cutting is their main priority, the report claims. More than half
of the respondents (53%) believe that online card services stimulate offline
spending as well as Internet based transactions. While online transactions continue to account for a minority of total consumer purchasing, the Internet has helped launch some of today’s most successful credit card brands. The report, Online Credit Card Services: After the Hype, the Reckoning, states: "Egg, Smile, and marblestm are all products that would not exist but for the Internet. Between them, these brands are responsible for a significant increase in competitive activity on and off the web."

Egg, the leading internet-only brand, has 2 million cardholders, or about 4%
of the UK market. The internet-heavy brands are important because there is a
significant shift in potential consumer spending to the web. According to
NetValue, the Internet measurement company, 15 million people, or a quarter
of the UK population, now have Internet access at home. The report notes
that Egg have recently moved into profit. Helen Clulow said: "Attitudes to e-business have changed. Online services play only a modest part in attracting customers, but are vitally important in keeping them in the fold. No one doubts the need for a full servicing capability. There are still questions about how this should be done. For the established players, the issue is how to leverage existing investments in technology. System integration problems and cost are still the biggest barriers to online services."

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