Bringing Home the Bacon with a Good Card Program

Bob Legters
Chief Product Officer, FIS North American Retail Payments Product Management
Posted on October 6, 2016

Credit Card Programs and Services

Why Card Programs are the Products that Keep on Giving

With all the excitement and buzz surrounding the payments environment right now, it’s hard not to get blinded by all the shiny objects.   While the market makes announcements about virtual currency, digital channel development and faster payments, all of us can lose track of the importance and power of traditional card programs. But those programs remain the foundation of modern payments – and they have a long road ahead.

Cards for Starters

Whether we are discussing prepaid, debit or credit, card programs are central to developing deeper retail customer relations. Cards serve every single bank customer, providing a path to developing stronger client relationships. Typically, a card account will be the first product that a prospective customer takes as part of the onboarding process. Prepaid cards even serve the unbanked customer, preparing the way for a fuller relationship once that client becomes more established and seeks out other, more flexible services.

Cards provide regular opportunities for direct customer interaction. With multiple transactions per month, customers continue to reliably turn to cards for their daily purchases. With each transaction, banks also uncover valuable data on client lifestyles and life events that can be utilized when promoting complementary products and services that may suit the customer.

Banks need to maximize their complete card strategy now – prepaid, debit and credit – in order to exploit the profitable potential of credit services.

Serving Up the Revenue

Over the last five or six years, card usage has grown enormously. Debit card usage is up over 50 percent, while credit cards up by just under 30 percent, according to The Nilson Report from Dec. 2015. These upward trends look set to continue to the end of the decade as card penetration continues its steady growth.

There are currently just under one billion credit cards and over 750 million debit cards in circulation in the United States. They finance over $3 trillion in credit card purchases, and around the same value in debit purchases, according to Verdict Financial. Understandably, prepaid volumes are lower than the annual credit and debit card averages, but continue to grow. Similarly, transaction values vary with card types (credit card transactions average just under $100 with the average debit transactions around $50), but these numbers on the rise. In an increasingly profitable business line, with growing customer adoption rates, banks need to re-evaluate their card strategies to ensure their true potential is realized.

Five-Star Service

Of course, most banks already offer multiple card products and related services. But as we emerge from a period where credit was harder to come by, it is vital that banks position themselves to reap the most benefit as the market picks up.

Typically, a third of all debit card holders will also hold a credit card from the same provider. How do you match up? If you’re below that threshold, it is likely that you are missing one of the easiest customer groups.

But banks also shouldn’t limit themselves to their existing customer base for new card offerings. There is an industry-wide marketing push to grow card services, often from new entrants to the market who are not restricted by expensive legacy infrastructure concerns, so it is vital to remain in the game.

Given society’s current migration towards an increasingly digital marketplace, banks must market online. Without a sophisticated digital and mobile strategy, banks risk missing out on many demographics, especially the Millennials and the upcoming Generation Z prospects who are just about to start their independent financial journeys.

However, growing the customer base will not be successful without the right card strategy backing it up. Best practices in card management dictate maximizing the efficiency of operations. This implies a centralized prepaid, debit and credit architecture that offers interoperability, rather than technology and business silos for each card line. Focus on growth for all card types – ideally with a well-chosen technology partner and extensive use of standard industry tools. This way, you can build out customer base for the future and maximize the cross selling of additional financial products. But above all, lead with a seamless and frictionless customer experience.

Don’t Skip the Eggs and Toast to Go with that Bacon

As with many banking products and services, it is the secondary benefits and services that can make all the difference. Rethink the loyalty schemes that are associated with the cards: how can these schemes interoperate between card and payment types?

Similarly, strong fraud protection mechanisms, including minimized card threats and quick response time when attacked, will ensure long-term benefits for all concerned parties. Customers are increasingly expecting simpler access to their services, often through mobile apps or online interfaces. Self-service and ease-of-use are very strong drivers for adoption and continued growth in usage.

Each individual card product has its own unique benefits, but the benefits only increase as you layer on more cards and services. It may start with a prepaid or debit card, migrating toward a credit card, but on the way, banks need to make better use of the access and data they have in order to grow the number of products and services under management for each customer. Remember, cards are more than just a revenue stream, they are the accelerator to closer customer entanglement.

Let’s not forget that, with all the excitement about the new channels and tools that are used to access consumer funds, the importance is in offering the location for those funds. Both debit and credit accounts, although card-based, can be accessible through digital and virtual channels. Don’t discount the change coming in the future, but there is plenty of time to focus on your card programs and drive relationships and revenue as you prepare for new channels.

So after you have a healthy breakfast, ask yourself “Are you taking advantage of the prepaid, debit and credit card combination for your business?”

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Bob Legters
Chief Product Officer, FIS North American Retail Payments Product Management

For the past two decades, Bob has focused on products and services support for clients. He has spent 17 of those years in a leadership role with groups ranging from 5 to 200 employees. Bob’s unique experience allows him to efficiently operate at a level that exceeds the normal executive role of understanding and recognizing client and consumer needs in the payments space.