The credit card market consists of
two very different businesses: card
issuance — the “consumer end”,
which provides credit cards and
bears the credit risk of the customer
and merchant acquiring, and the
“backroom business”, which “signs
up” outlets to accept credit cards
and carries out processing.
The two businesses are distinct,
and in the UK only a few firms are
active in both. Box 1 shows the
interaction between these two businesses.
If the card issuer is a
member of an international payments
system, such as MasterCard or VISA,
an additional “link” is involved
between the merchant acquirer and
the card issuer.1
This article concentrates on the
card issuance business — the area
of greatest change. This business
earns income from both interest
and non-interest sources, although
interest income is usually the main
source.
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