.

CASE STUDY
“HOW MUCH DO CREDIT CARD
COMPANIES KNOW ABOUT YOU?”

ASSIGNMENT NO. 1
 CASE STUDY

1. What competitive strategy are the credit card companies pursuing? How do

information systems support that strategy?

The competitive advantage that credit card companies pursue is to learn about their

customers through which they upgrade or customize service for their customers. This advantage

is achieved by recording all the sales detail of the purchases made by the customer. This sales

information is logged into a massive data repository maintained by the card issuer. Each item

that is purchased is assigned a four-digit category code that describes the type of item purchased.

Every grocery store, fast food restaurants, doctors, bars, and bail has a unique code. This helps

credit card companies in being better equipped in learning the behavior and spending habits of

their customers. This, in turn, helps the company in different factors such as which product to

promote in the future or guard against credit card fraud. This strategy will also help decisions

about which risky customer credit card limit to shrink.

The way Information systems support this strategy is by allowing the companies in

collecting, processing and storing this information in such a way that will be easy to use and

access by employees.

2. What are the business benefits of analyzing customer purchase data and constructing

behavioral profiles?

Credit card companies use mathematical formulas and insight from behavioral science to

make customer profile through these analyses they see which customer pays their debt on time

and which don’t. And also their customer’s ability and inability to pay off their credit card

balances and other debts. Basically, to know which customer will be profitable to do business

with and which not. The benefit of doing so is that now they can deny credit card applications or

reduce the amount of credit available to risky customers.

January 20, 2021

1
 CASE STUDY

Another benefit that the companies have is that through the analysis companies will know

the likes, dislike, preference, and habits of the customers. This will help in personalization.

3. Are these practices by credit card companies ethical? Are they an invasion of privacy?

Why or why not?

Personally, I believe this practice is ethical, and it doesn’t violate any customer’s privacy.

However, some will see it as an invasion of privacy because they believe that the information

can, be used to abuse and harm the credit cardholder. But no-one is forced to sign-up and use a

credit card. If anyone wants to hide a purchase from the credit card company they can, simply

make the purchases through cash, and it is not recorded.

The customer should recognize that it is a necessary action because it guarantees that

money is not being used for anything wrong. Law enforcement agencies can also use these

information in tracking down criminals.

January 20, 2021

2