By Evan Sparks
Dee Hock may have revolutionized how banks issue credit cards, but it took Richard Fairbank to get those cards into the hands of ordinary Americans. For decades, credit cards were the domain of the affluent, and they were a fairly standard product—“‘one-size-fits-all’ cards with 19.8 percent interest rates and $20 annual fees,” Fairbank says. He studied the card industry up close as a management consultant in the 1980s. What he realized was that banks had a wealth of data about current and potential customers but that card offers were not tailored to individual customers’ needs and risk profiles.
In 1988, the 37-year-old Fairbank struck out with a business partner, Nigel Morris. They pitched their ideas to 20 banks unsuccessfully before being put to work running a new credit card division of a small Virginia bank called Signet. They pioneered new approaches in marketing credit cards, such as tailored interest rates customized to customers and preapproved offers with pitches to transfer balances.
By leveraging data to make the case for a more marginal customer’s creditworthiness, Fairbank was also able to expand the credit box and provide cards to more Americans who had been left out of the credit market. Fairbank helped take credit cards from a province of the well-to-do and make them a mainstream financial product.
Their use of data to tailor financial products was revolutionary. In 1994, Signet spun off the credit card division as Capital One. The company grew rapidly and brought fresh thinking into traditional banking with several strategic acquisitions. Today Capital One is a diversified financial institution that remains a leading credit card issuer, one of the nation’s largest auto lenders and a leader in providing a top-notch digital experience—even as the company reinvents its physical retail presence with Capital One Cafes.
Today, about three-quarters of Americans have credit or charge cards, and they account for nearly a quarter of all payments. Through big data and clever marketing, Fairbank changed the way Americans acquire and use credit cards.
