Journal of Korean Society for Quality Management (품질경영학회지)

Korean Society for Quality Management (한국품질경영학회)
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A Study on Cost Rate Analysis Methodology of Credit Card Value Proposition

신용카드 부가서비스 요율 분석 방법론에 대한 연구

  • 이찬경 (홍익대학교 대학원 경영학과) ;
  • 노형봉 (홍익대학교 경영대학)
  • Received : 2018.08.19
  • Accepted : 2018.10.06
  • Published : 2018.12.30
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Abstract

Purpose: It is to seek for an appropriate cost rate analysis methodology of credit card value propositions in Korea. For this issue, it is claimed that methodologies based on probability distribution is more suitable than methodologies based on data-mining. The analysis model constructed for the cost rate estimation is called VCPM model. Methods: The model includes two major variables denoted as S and P. S is monthly credit card usage amount. P stands for the proportion of usage amount at special merchants over the whole monthly usage amount. The distributions assumed for P are positively skewed distributions such as exponential, gamma and lognormal. The major inputs to the model are also derived from S and P, which are E(S) and the aggregate proportion of usage amount at special merchants over the total monthly usage amount. Results: When the credit card's value proposition is general discount, the VCPM model fits well and generates reasonable cost rate(denoted as R). However, it seems that the model does not work well for other types of credit cards. Conclusion: The VCPM model is reliable for calculating cost rate for credit cards with positively skewed distribution of P, which are general discount card. However, another model should be built for cards with other types of distributions of P.

Keywords

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Figure 1. NAVER’s brand search result for the keyword ‘Shinhan card’

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Figure 2. Comparison of Exponential, Gamma and Lognormal Distributions (PDF)

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Figure 3. Example of upper limit for special discount

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Figure 4. How to derive the transition matrix

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Figure 5. Value proposition of a credit card

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Figure 6. VCPM simulation result for scenario 1

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Figure 7. VCPM simulation result for scenario 2

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Figure 8. VCPM simulation result for scenario 3

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Figure 9. P distribution of scenario 1 & 4

Table 1. Types of credit card customer value propositions

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Table 2. Credit card value proposition cost rate by year

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Table 3. Summary of credit card brand searching

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Table 4. Common factors in value propositions

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Table 5. Credit Card Usage Amount by Merchant Group `17.4Q (BOK)

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Table 6. Consolidation of merchant groups into one single merchant group

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Table 7. VCPM

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Table 8. Positively skewed distribution

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