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Outlook: Barclaycard

THE CREDIT-CARD business is money for old rope. How could it be otherwise when base rates are 7.5 per cent and yet card issuers can get away with charging their customers compound rates of 23 per cent? Barclaycard has sat at the top of the pile for the last 30 years, growing fat on a mixture of customer inertia and competitive apathy.

Like other industry leaders, however, Barclaycard is finding that the world doesn't stand still after all.

Ten years ago there were 80 credit cards in circulation and Barclaycard only had to worry about serious competition from Access, Visa and Mastercard. Now there are 1,300 varieties on offer. Even Guide Dogs for the Blind has one. More seriously, the supermarkets, direct banks and US finance houses have arrived on the scene with rates to make the eyes water.

Barclaycard retorts that it is still good value for money, pointing out that two third of its customers clear their accounts before they have to pay interest. But when the payments do start they snowball painfully. For the increasing numbers who live in a state of perpetual debt, a low APR and shorter interest free period makes better economic sense.

Barclaycard has tried to stem the tide of defections by tying up Visa so that it no longer markets itself independently. It has also led the way in offering extras like cheap electricity, air fares and telephone bills. But having to spend pounds 9,000 to earn a free toaster is the kind of offer most of us can decline.

Finally, Barclaycard is grasping the nettle and making its staff pay for its increasing vulnerability. A quarter of the workforce or 1,100 jobs are, to use the company's quaint phraseology, going to "fall away", as Barclaycard replaces labour with new technology.

Aside from the cost-cutting, however, there is not a single mention of any new strategy to head off the competition. The latest fall in profits suggests that Barclaycard's spectacular margins are already under pressure. If it wants to survive at all long term, it may have to think of cutting rates as well as jobs.