Great Post on the Business Model for Credit Cards

Once in a while, I encounter a great post.  This is one of them:

Welcome to Adult Life”: American Express, Synchrony Financial & the Changing Credit Card Landscape

Two years ago, I investigated the moat around American Express’s (AXP) business.  I assessed the moat as wide and identified a positive feedback loop at the heart of it.  The loop ran like this:

1. Spending on Amex cards is higher on a per-card basis than its competitors
2. Merchants want to accept the Amex card to attract these high-paying customers
3. This affluent customer pool enables Amex to charge higher discount rates
4. Because of the revenues generated from higher-spending Cardmembers, Amex has the cash to invest in more attractive rewards and other benefits to Cardmembers
5. The rewards program in turn creates incentives for Cardmembers to spend more on their Cards.

The post goes on to look at the competitive landscape for credit cards with a special focus on Synchrony Financial (SYF: NYSE).

It is absolutely fascinating - a clear-headed, logical analysis of the playing field ...  beautifully written by a person who is in command of his craft.  

The post appears on Punch Card Investing, one of the best of its breed.  

Punchcard's focus?  Dedicated to the Exploration of Moats and High Quality Businesses

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It is so good that I read every post.

ps  I looked at SYF about a year ago and decided to pass.  While its business model was engaging, there are other companies with more attractive possibilities.  

Looking for an interesting business model? Investigate Input Capital, one of the first agricultural streaming companies in the world.  Here is a quick primer on the model:
http://s1.q4cdn.com/584800959/files/doc_downloads/CGW141111-edit.pdf

I wrote about it in an earlier posting in The Financial Passage Maker.  Company management has demonstrated an ability to respond quickly and effectively to setbacks.  The capacity to learn and respond is an attractive attribute which is lacking in many enterprises.  In the end, companies are all about people - something that many financial analysts often forget.