WILMINGTON, Del. - A tightening and maturing card market in which it is becoming steadily more difficult to grow appears to be pushing MBNA into directions that may make it a less attractive buyer for credit union card portfolios. The firm has been a leading purchaser of credit union card portfolios for several years. The two most noticeable new directions include a willingness to promote and strengthen its own MBNA brand, which the bank has traditionally not done, and an increased emphasis on developing new products that it will cross-sell to the customers it makes through its affinity partnerships. The company claims to have affinity card issuing relationships with over 5,000 groups, retailers and other financial institutions. Traditionally MBNA has focused most of its attention on building itself as an almost completely monoline card issuer, offering relative few other products and being content to downplay its own brand in favor of helping its affinity groups market its cards under their own brands. But a national card market that continues to mature and become more saturated has been making this strategy steadily more challenging, according to card analysts, as it has bumped up against both the sheer number of credit cards that many Americans already have and a trend among Americans not to join things like civic associations, alumni associations and sports leagues as often as they used to. "Affinity is just a much harder way to reach consumers than it might have been 15 years ago," explained one card consultant who declined to speak for the record, citing a relationship with some of the affinity groups that MBNA serves. "Americans are joining organizations less and they are less willing to make credit card decisions based on a membership in a group." But other analysts maintain that Americans' lack of enthusiasm for organization pales in significance beside the fact that most Americans have the cards they want and it is becoming steadily more difficult to convince them to open new ones or bring their balances to new ones. They point out that MBNA isn't the only one feeling the pressure. Capital One, a competing national card issuer, fell short of Wall Street earnings expectations in the fourth quarter of 2004, citing largely the increased advertising and marketing costs it has had to pay to find new customers. The advertising has helped bring the card brand a national profile, but has not necessarily generated the increased card issuing that the company expected. The Changes To counter these pressures, MBNA has announced two strategies which might help it improve its financial situation overall but which may also make it a less attractive partner for credit unions considering the sale of their credit card portfolio. First, it has decided to begin strengthening its own brand recognition. Breaking with its tradition of taking a low key approach to marketing itself, MBNA has announced an advertising campaign that it will launch with a 30-second spot on national television during the upcoming Super Bowl. Advertising executives in the press have estimated the cost of a 30-second spot in the February 6th game at between $2.4 and $3.4 million. The spot will kick off a national MBNA branding campaign that will include print, television, radio, online and outdoor and indoor marketing, the company said. "The Super Bowl provides the ideal venue for MBNA to make its advertising debut and connect with millions of consumers who interact with our products every day," said Mark Levitt, senior executive vice president for the card issuer. "The campaign will reinforce how MBNA connects people with the teams, brands and activities they identify with most." Second, and more controversial for credit unions, the company announced that it will continue developing products other than credit cards and that it will begin cross-selling those to the card customers it makes through its affinity groups. The announcement came in a presentation to investors that the company offered on January 21. In the presentation, the company made the case that the credit card market has significantly matured and that it will need to expand its operation into more than just credit cards. MBNA particularly noted that it has significant success with loans offered to consolidate unsecured debt and home equity lines of credit. The company reported that it originated $1.5 billion in mortgage loans in 2004, implying that almost all were to members of its affinity groups. The company noted that 20% of its customers to whom it markets though its affinity groups use products other than its credit cards. The company's presentation highlighted the deposit taking it does, as well as other consumer and business lending. Where Do Credit Unions Fit? MBNA has long admitted that it offers products other than cards but has historically steadfastly maintained that it does not cross-sell those products to the members of its credit union partners, sometimes writing commitments not to do so into the credit union agent agreements themselves. But William Koo, CEO of Asset Exchange, a leading independent broker of credit union card portfolios, noted that some degree of unintentional cross-selling may be inevitable given MBNA's national reach and marketing effort. "I don't believe MBNA sets out to cross-sell to credit union members," Koo said, noting that if there is a national marketing effort offering loan products to MBNA cardholders it may be that some credit union cardholders get those offers. But Jim Donahue, spokesman for the card issuer, firmly rejected that possibility. "I believe it's common knowledge that MBNA does not cross-sell its products to credit unions," Donahue said. "MBNA has different divisions and does not treat all divisions in the same way," he said. "We understand that a credit union's brand on their cards is much stronger than the MBNA brand and we respect that." Donahue said that the investor presentation was correct in regards to how the card issuer plans to move forward with its affinity groups, but was not clear about how it planned to treat financial institution issuing partners, including credit unions, differently. "In retrospect the information presented to the investors was correct," Donahue said, "but it could have made that distinction more clearly." -

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