Capital One Business Decision Making
The Capital One Business Decision Making project is part of the University of Nottingham Advantage Award which I completed while studying.
Capital One is an American financial corporation with an office in Nottingham specialising in consumer credit cards. As part of this project we prepared a memo for Capital One with our business recommendation and presented our ideas to the company at their offices.
Problem Statement
Balance Transfer (BT) Cards are credit cards that offer 0% interest on balances tranferred from another card for a set amount of time, for Capital One the period is 12 months. The market for BT cards is highly competetive and customers are known to jump from BT card to BT card avoiding ever paying interest on their debt, known as ‘gamers’. It is also well known that a significant proportion of customers do not pay off their balance before the teaser period which means they end up paying interest on their debt.
We were given an excel model showing the key figures for the Capital One BT card and those of their competitors which I refer to as Comp A-E.
| Capital One | Comp A | Comp B | Comp C | Comp D | Comp E | |
|---|---|---|---|---|---|---|
| Teaser Length (months) | 9 | 12 | 11 | 10 | 10 | 8 |
| BT in fee | 1.1% | 1.5% | 1.4% | 1.2% | 1.3% | 1.0% |
| Post-Teaser APR | 17% | 20.9% | 22.9% | 19.9% | 20.9% | 19.9% |
| Product Score | 41% | 78% | 64% | 56% | 49% | 28% |
| No. Customers | 250,000 | 2,500,000 | 1,000,000 | 500,000 | 500,000 | 250,000 |
| Average BT fee size | £2,033 | £3,875 | £3,217 | £2,792 | £2,485 | £1,375 |
| % Gamers | 15% | 50% | 40% | 30% | 20% | 10% |
| PV per customer | £94.36 | £95.49 | £134.12 | £121.51 | £138.12 | £97.58 |
| Total PV (Profit) | £23.6m | £238.7m | £134.1m | £60.8m | £69.1m | £24.4m |
Using these figures and some other model inputs we are to make a recommendation to Capital One senior management with the ultimate goal of increasing market share and total profit.