Our third theme is Opportunity, and we are excited about those opportunities we see. For a number of reasons, we have less competition in the underserved credit card space than we have had over the last three years. We have observed this development in both our market testing and anecdotal information from other companies. We have also expanded our product line to include financial products and services for the lower tiers of our target market. Over the last few years, we have operated the Company in a very conservative manner, given the external operating environment. Today we are excited, as we have the tools needed to grow, the environment has improved and we have obtained appropriate liquidity.
We began CompuCredit in 1997, convinced that there was a large segment of the population who sought an attractive credit product, but did not qualify for credit based on traditional evaluations methods and models. During the last six years, we have experienced a lot of change: change in the credit card industry and change in the economy at large. Amidst this change however, one thing has stayed constant – there is still a very large piece of the American consumer market that is currently being underserved by other lenders. Not only that, this consumer segment is one in which we believe we possess superior expertise. We believe that the size of our target market is at least 50 million customers. We divide this customer base into upper and lower tiers, and we have products and services tailored to meet the needs of both tiers, whether we are originating new products for these two groups or purchasing existing accounts.
In 2004, we anticipate expanding within our four complementary business activities: upper tier credit card originations, lower tier credit card and stored valued card originations, portfolio purchases and charged-off receivables purchases. We will briefly discuss the history and outlook for each of these areas.
Upper Tier
We originally offered general-purpose credit cards to a part of the market that had been underserved, referred to by some as near-prime. We were able to rapidly and profitably grow in this area. What’s more, the market for securitizations was robust and efficient – i.e., we could get the funding that was necessary to deliver attractive returns on our equity dollars. Unfortunately, as we have discussed before, the competitive pressures in this market caused it to become much less profitable than it had been. The recession took its toll as well. Therefore, while we believed that our overall business model was still profitable, the securitization markets had become much more cautious due to the general economy and specific problems at some of our competitors. As we have communicated in the past, we made the decision to shrink the size of our originated portfolio and to, instead, focus on acquiring portfolios from those who were having greater difficulty in this sector of the market.