A newly released Fed report on collegeaffinity programs (http://www.federalreserve.gov/BoardDocs/RptCongress/creditcard/2011/downloads/ccap_2011.pdf),which was mandated under the CARD Act, notes the surprising factthat three out of four new issuers of alumni programs are creditunions.
Alumni programs came under scrutiny as part of the broaderexamination of card issuing to students under the CARD Act. But thetruth is that many of these programs are small with limited growthopportunities to be attractive to large issuers. But credit unions,with local connections that might align well with a regionaleducational institution, could prove to be a better fit. In fact,many of these new issuers are credit unions affiliated with theiruniversity partners.
While the report notes that FIA Card Services (legacy MBNA) lostthe most college programs, FIA is still by far the largest issuerin the space. And overall, there were a net 41 fewer collegeprograms at the end of 2010, indicating continued fallout from thescrutiny on these programs, as well as their economics and ofcourse the post-recession environment.
As issuers reexamine their portfolio economics, and educationalinstitutions reexamine their partnership agreements, there could besome new players in the market. Mercator will be reviewingdevelopments in the small issuer market this year; this may be thestart of one new strategy for small issuers and credit unions inparticular to jump start their credit card issuing programs.
