When Brian Moynihan next week assumes control of Bank of America Corp., among other challenges he will face daunting new competitive pressure in the credit and debit card arenas. Moynihan, 50, on Jan. 1 becomes the nation’s largest bank’s president and chief executive officer, succeeding Kenneth D. Lewis, who is retiring.'


 The incoming chief recently outlined significant strategic changes he plans for BofA’s cards operation, having served as the bank’s president of consumer and small-business banking and card operations for the last three months. Among other changes, Moynihan last month told analysts at the BancAnalysts Association of Boston that he plans to shrink the overall credit card portfolio and cross-market cards more heavily to existing and new bank customers, relying more on “relationship” marketing and less so on mass-mailed promotional credit card offers.


But one analyst suggests Moynihan’s challenge in rebooting BofA’s card operation will call for a lot more than tweaking card-underwriting standards and marketing strategies. “For the first time ever, BofA in 2010 will face head-to-head competition with Chase and Wells on a national basis when it comes to marketing cards at the branch level, and I expect the competition to be very fierce,” Brian Riley, a research director with TowerGroup, tells PaymentsSource.


 JPMorgan Chase & Co. and Wells, Fargo & Co. this year completed the transition of their respective acquisitions last year of Washington Mutual Inc. and Wachovia Corp., and both significantly increased their number of branches and ATMs. Both banks gained a largely national footprint, which Riley says is crucial for cross-marketing credit and debit cards to existing customers.


“Relationship marketing will be the big key to improving credit card profits in 2010. Wells already is an expert at it, and Chase has a good lead,” Riley says, noting Wells is well known within the industry for its efficient, branch-based card-marketing strategies.


BofA has some 6,000 branches nationwide and 18,000 ATMs; earlier this year the company announced it would cut its overall number of branches by 10% as it moves to a new strategy emphasizing mobile banking (PaymentsSource July 28, 2009). Wells has 6,653 branches in 39 states and 12,352 ATMs, while Chase counts 5,100 branches in 32 states and 15,000 ATMs.


If credit card purchase volume continues to decelerate, as it has this year during the recession, banks in 2010 will push harder to promote debit cards, which often are part of a branch-centric marketing strategy, Riley suggests. “Debit card marketing will be hot in 2010 as banks work to push deposits and multiple account relationships with customers. Branch-based marketing will be key to that effort,” he says.


Moynihan last month told analysts he plans to tilt BofA’s card-marketing efforts more toward transactors, who pay off their balances each month, than toward borrowers who revolve balances.
Overextended borrowers have weighed heavily on BofA’s balance sheet with record charge-offs through each quarter of this year.


Moynihan also said he plans to reduce the duration of low-interest-rate promotional offers to credit card customers. “Simply put, (we will be) giving credit to the core customer base and (letting) other portfolios that are more stranded run off,” Moynihan said.


It all adds up to a monumental challenge for BofA in a year when Chase and Wells appear to be ascending, as their transformation to national banks is complete.


“For a hundred years, BofA has owned the retail banking market in California, but now they are up against a much more powerful national player in Wells,” Riley says. “And Chase is also on the rise in the West, where WaMu gave it new geographic clout. In all of its lines of business, BofA is fighting a multifront war, but the cards battle alone will not be easy.”

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