Up against a pack of hungry cards

Barclaycard is fighting to maintain its dominance in a fiercely competitive market, says

ob Ayling and John Eaton. Sir Peter Bonfield and John Eaton. John who? Compared with Ayling and Bonfield, Eaton is virtually unknown. But the organisation he runs is not.

Barclaycard is almost as deeply woven into the economy as British Airways and British Telecom. Nor is Barclaycard any less successful. Last year it reported operating profits of pounds 340m - 17 per cent of the profits made by its parent company, Barclays and a sum not that far off the pounds 504m reported by BA.

Nor is Barclaycard in anything remotely approaching a static market. Eaton at Barclaycard faces a challenge with which Ayling at BT and Bonfield at BT will be familiar: hordes of newcomers out to steal customers by cutting prices.

"In 1990 there were 80 credit cards in this market," says Eaton in his studiedly offhand manner. "Today there are 1,400. In 1990 there were 20 organisations in my business. Today there are 140."

While BA is bedevilled by easyJet and Ryan Air (while still competing against US and continental European flag carriers) and BT is threatened by MCI WorldCom and other new world communications com-panies (while still competing against other erstwhile monopolies), Barclaycard is up against an even greater profusion of newcomers and established players.

Take, first, the homegrown new entrants like Royal Bank of Scotland's Advanta card, Alliance & Leicester's Money Back card and Sainsbury's Bank Classic. Add to them the Genghis Khans from abroad - American "monolines" such as Capital One. Since 1994, Capital One has mounted a sustained attack on the UK - setting out to challenge the inertia that has long characterised the market. Its weapon is price: it offers cards with interest charges far lower than the rates charged by Barclaycard.

"It's no secret that our reputation for being the leader in offering value for money has been challenged," Eaton concedes. "But what we're doing now will place us right back on top of the value tree."

Last week, Eaton unveiled a fusillade of marketing initiatives. Barclaycard's rewards scheme now allows customers to get air miles or discounted phone calls instead of flowered tea kettles ordered through a catalogue harking back to Edwardian times. There's also a free extended warranty for customers buying fridges or cookers on their Barclaycards.

Eaton has also cut interest charges by 1 per cent to 19.9 per cent. And he has reduced from pounds 5,000 to pounds 2,000 the amount customers have to spend to have their pounds 10 annual fees waived.

These measures are carefully thought out to blunt the sales pitches of the opposition. Talking to Eaton, you sense that a lot of heavy thinking has gone on to distil the new set of propositions to jewel-like clarity. But they remain modest. "We don't believe in competing on price alone," is the way he puts it.

Nor is there any urgency to do so. Credit cards, like air travel and telecoms, are booming. Barclaycard was launched in 1966 and has rarely looked back. Today 15 per cent of consumer spending is paid for with plastic, according to Visa and Mastercard.

And still the market is underdeveloped. "Forty per cent of people have credit cards in the UK," Eaton says. "It's 80 per cent in the US. I don't think we will, or should, go that high. But I foresee 60 per cent here."

The same upward trends apply to the number of credit cards held by individuals and the amount of spending on them. Riding these trends, Barclays' operating profit was up 19 per cent last year on 1997.

The issue facing Eaton, in short, is hardly survival. It's rate of growth compared with the competition. Barclaycard's share of the pounds 65bn credit- card market has slipped from a third to less than 30 per cent over the past three years. Eaton is focused on stopping this erosion. Competitors argue he is doing too little too late.

"Their marketing initiative will slow attrition, but it will be difficult to reverse," says Mark Austin, marketing manager of RBS Advanta. Patrick Nelson, director of external affairs at Capital One, is more scathing. The days when the credit-card business was about burnishing your brand are gone, he says. The game now is micro-segmenting the market and giving constantly updated pitches. "Last year we conducted 28,000 market tests on 6,000 different product combinations."

More disinterested observers are less harsh. "Barclaycard should not be underestimated," says Constantine Psaltis, a partner at the strategic consultancy Mitchell Madison. "It's got a magnificent franchise. It can do what BT is doing to fight off new entrants: adopt complex pricing arrangements to appeal differently to different segments of its customer base."

Still, the contrast between the raw if self-serving candour on the part of the new credit-card companies and Eaton's circumspection in spelling out his targets and even his strategy sends a message: it's Barclaycard that's on the defensive.

"Credit cards are on the verge of a paradigm shift," says Nigel Mengham, marketing and sales director for NatWest Card Services. Markets are going global. E-commerce will transform shopping. "Different people are dealing with this paradigm shift in different ways."

Eaton's effort to stabilise Barclaycard's home market is sensible. But is it enough? Pressed to go beyond his carefully worked out script, Eaton repeats: "We think our initiatives will put us back on top of the value tree. But only time will tell. In nine months we'll know."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joe Cocker performing on the Stravinski hall stage during the Montreux Jazz Festival, in Montreux, Switzerland in 2002
musicHe 'turned my song into an anthem', says former Beatle
News
Clarke Carlisle
sport
Sport
footballStoke City vs Chelsea match report
Arts and Entertainment
theatreThe US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
News
Coca-Cola has become one of the largest companies in the world to push staff towards switching off their voicemails, in a move intended to streamline operations and boost productivity
peopleCoca-Cola staff urged to switch it off to boost productivity
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there