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Payment Card Business Still Offers Variety of Opportunities for Growth

The future of cards is still bright, but the sky's the limit on just what form card payments will take.

Using Cards to Build Profitable Relationships

As far as Fifth Third Bank's (Cincinnati; $99.8 billion in assets) Jon Groch, SVP, director of bank cards, is concerned, the market will not see growth patterns of 25 percent to 30 percent in new card penetration. But, he says, it's important to watch for growth as it relates to new places in which cards can be used. It was only in the past few years, for example, that fast food restaurants began widely accepting credit cards as payment.

More important, according to Groch, banks must look to existing customer relationships for growth. "Relationships are becoming more important," he says. "The players that are growing are those that have relationships with their customers beyond just the card." According to Groch, this is Fifth Third's strategy: "We don't want the credit card as the single relationship with us," he says.

But while cardholders are ripe for relationship building, the cards themselves are, in turn, an excellent tool for building those relationships, according to experts. As a result, the industry has renewed its interest in the card space. In the past 12 months to 18 months, more and more banks have been turning their attention to cards. Several financial institutions, including Wachovia (Charlotte, N.C.) and PNC (Wyomissing, Pa.), threw their hats into the card arena for the first time or after a several-year absence.

First National's Johri explains that about 10 years ago many banks decided to leave cards to the monoline issuers, such as the old MBNA, which is now part of Bank of America (Charlotte). However, the banks began to realize that they were losing out on a key relationship with customers. As a result, the movement by banks back into cards is taking on new life.

"With cards, you are able to acquire customers fairly easily through multiple channels," Johri says. "Once you have them, you can sell them other products. This anchors the relationship to the bank. Banks need this relationship. We don't want our customers using our competitors' cards."

Fifth Third's Groch agrees, saying control is at stake. "Banks now see cards as a good way to increase relationships," he relates. "When you have another bank doing this for you, you don't have as much control over your customers."

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