INTERACTIVE SESSION: ORGANIZATIONS HOW MUCH DO CREDIT CARD COMPANIES KNOW ABOUT
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INTERACTIVE SESSION: ORGANIZATIONS HOW MUCH DO CREDIT CARD COMPANIES KNOW ABOUT YOU? n Kevin Johnson returned from his honeymoon, insights about the relationship of certain types of a letter from American Express was waiting for him. The letter informed Johnson that AmEx was slash- ing his credit limit by 60 percent. Why? Not because chases to a customer's ability or inability to pay off credit card balances and other debt. The card-issuing companies now use this information to deny credit card applications or shrink the amount of credit avail a payment or had bad credit. The letter stated: "Other customers who have used their card at establishments where you recently shopped, have a poor repayment history with American Express. Johnson had started shopping at Walmart customcrs. certain types of purchases that may unfairly charac- terize responsible cardholders as risky. Purchases of secondhand clothing, bail bond services, massages or gambling might cause card issuers to identify you as a risk, even if you maintain your balance respon- Welcome to the new era of credit card profiling Every time you make a purchase with a credit card, a record of that sale is logged into a massive data repository maintained by the card issuer. Each purchase is assigned a four-digit category code that describes the type of purchase that was made. There are separate codes for grocery stores, fast food restaurants, doctors, bars, bail and bond payments, and dating codes allow deal about each of its customers at a glance ibly from month to month. Other behaviors that raise suspicion: using your credit card to get your tires re-treaded, to pay for drinks at a bar, to pay for marriage counseling, or to obtain a cash advance. Charged spceding tickets raise suspicion because they may indicate an irrational or impulsive person- ality. In light of the sub-prime mortgage crisis, credit card companies have even begun to consider indi- viduals from Florida, Nevada, California, and other states hardest hit by foreclosures to be ris by virtue of their state of residen and escort services. Taken together, these credit card companies to learn a great Credit card companies use these data for multiple purposes. First, they use them to target future promotions for additional products more accurately Users that purchase airline tickets might receive promotions for frequent flyer miles, for example. The data help card issuers guard against credit card fraud by identifying purchases that appear unusual The same fine-grained profiling also identifies the most reliable credit-worthy cardholders. For exam ple, the credit card companies found that people who buy high-quality bird seed and snow rakes to sweep snow off of their roofs are very likely to pay their debts and never miss payments. Credit card companies are even using their detailed knowledge of cardholder behavior to establish personal connec- tions with the clients that owe them money and convince them to pay off their balances. mpared to a cardholder's normal purchase history The card companies also flag users who frequently charge more than their credit limit or demonstrate erratic spending habits. Lastly, these records are used by law enforcement agencies to track down Credit card holders with debt, the ones who never fully pay off their balances entirely and thus have to pay monthly interest charges and other fees, have been a major source of profit for credit card issuers. However, the recent financial crisis and credit crunch have turned them into a mounting liability because so many people are defaulting on their payments and even filing for bankruptcy. So the credit card companies are now focusing on mining credit card data to predict cardholders posing th One 49-year old woman from Missouri in the throes of a divorce owed $40,000 to various credit card companies at one point, including $28,000 to Bank of America, A Bank of America customer ser- vice representative studied the woman's profile and spoke to her numerous times, even pointing out one instance where she was erroneously charged twice. The representative forged a bond with the card- holder, and as a result she paid back the entire $28,000 she owed, (even though she failed to repay much of the remainder that she owed to other credit Using mathematical formulas and insights from behavioral science, these companies are developing more fine-grained profiles to help them get inside the heads of their customers. The data provide new This example illustrates something the credit card companies now know: when cardholders feel more comfortable with companies, as a result of a goodExplanation / Answer
Q1. What competitive strategy are the credit card companies pursuing? How do information systems support that strategy?
Answer1. Credit card companies pursuing some competitive strategies with the help of information systems that supports the strategy. They use mathematical formulas from behavioural science, by developing more fine-grained profiles to help them get inside the heads of their customers. These data provide certain relationships with customer’s ability to payoff credit card balances and debt. Through this fine grained profiling also identifies the most reliable credit worthy cardholders who never misses any payments who buys high quality of products.
Q2. What are the business benefits of analyzing customer purchase data and constructing behavioural profiles?
Answer2. There are certain business benefits and constructing behavioural profiles to analyze the customer purchase through their credit cards like every time when they make a card swipe or do any transaction through credit card, credit card companies check the purchases that they may unfairly characterize the cardholders as risky like pay for drinks, for marriage counselling obtaining cash advances etc. which raise their behaviour suspicious. Which makes the credit card companies to analyze the repayment capability of the cardholder, either company allows them to enjoy the interest free credit card or make the credit limit cut up to certain limits.
Q3. Are these practices by credit card companies ethical? Are they an invasion of privacy? Why or Why not?
Answer3. Credit card companies record every transaction of the cardholder at every place whether you make a make at grocery store, cash advances, for fuelling, restaurants, doctors etc. these transactions are stored into a massive data repository maintained by the card issuer with a four-digit category code that represents each type of purchase. These transactions can be check at any time on the basis of history of the cardholder to compare or check previous transactions to monitor any fraudulent and these records are also used by law enforcement agencies to track down criminals. If these data are monitors and stored well, financial crises would also be checked by the behavioural spending of the cardholders.
Mis in Action
Q1. If you have a credit card, make a detailed list of all of your purchases for the past six months. Then write a paragraph describing what credit card companies learned about your interests and behaviour from these purchases.
Answer1. Here is the purchases made by the credit card for the past six months like restaurant bills, fuelling, new clothes, grocery, utility bills, doctor or medicine bills, insurance payment, mortgage payment, air tickets etc. from this kind of purchases made through the credit card gives a light on the behavioural and interests of the purchases made by me that, I prefer to pay any payment through card rather than cash and made all the payments on time. I purchased only high quality products with only need based. This shows the value of money and avoids any interests or penalty on delaying the payment which is worth for every credit card companies.
Q2. How would this information benefit the credit card companies? What other companies would be interested?
Answer2. The information benefits the credit card companies about every purchase and quantity of purchase in details give the benefit to other companies about the interests and behavioural of the customer about the purchases made by customer. Credit card companies only interests in the repayment of their credits and repayment capability of the customer and know the exact credit limit for a customer of any given month and decision to be taken by the companies whether their card limit should be increased or decreased. While other companies, interested in the interest of the purchase of the customer.
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