A Case Study of X-Bank Corporate Credit Card

A Case Study of X-Bank Corporate Credit Card
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ANALYSIS OF THE PROBLEMS
This paper is an analysis of a case of corporate credit card issued by X-Bank. X-Bank is a major holding company that introduced corporate credit card in its quest to develop new products and services and in turn increase its profitability. This corporate credit card is issued by X-Bank in collaboration with VISA International to serve the business travel and entertainment needs of customers within the corporate world. The venture was quite tempting given that corporate credit cards are used to pay for expenses incurred by individuals on business expenses with an annual turnover exceeding $500 billion. Despite these huge market potential; corporate credit card market has been previously dominated by American Express. American Express offers in addition to the credit card, financial management and travel services to its clients. Following American Express` dominance in the corporate credit card industry, X-Bank offered many incentives to clients to lure them. Indeed, with less than five years from the commencement of the initiative, X-Bank has attracted 70 Fortune 500 firms and its market share is roughly equal to that of Diners Club which has been in business longer. Despite its success in acquiring a market niche, X-Bank has some eminent problems and the paper will make an analysis of these problems and recommend corrective actions that the bank can adopt to reverse this trends. The problems that the bank is facing include; misuse of its corporate card, uncooperative firms and delayed or failure by clients to make payments. The bank is also facing a problem of losing favor with Company-A which has help acquire new clients.
In its ambitious plan to attract clients, X-Bank offered incentives without doing adequate feasibility study to understand the consequences of their decisions. Under its credit card program, there are three alternative arrangements that determine the contractual obligations for clients using its credit cards. These arrangements are the individual liability where individuals are responsible for their charges, the corporate liability where the corporate client foots all the charges and the third arrangement is the Joint-and-several liability where the company guarantees its individual cardholders to ensure that they make payment to X-Bank. The bank relaxed its underwriting standards and allowed lax collection practices. X-Bank allowed less security in its Individual Liability arrangements. These incentives have turned against X-Bank with several clients failing to honour their obligations which leave them with few options on how to recover the amount. The bank is in a dilemma since if it decides to change their terms, it could lose clients.
The problems of X-Bank mostly relates to their failure to recover all the money promptly and fully from clients. One of the probl...