How Can Banks Boost Their Credit Card Issuing Program?
Calling all small- to mid-size credit card issuers! Let’s talk about card issuing. More specifically, let’s talk about how you, the community and regional financial institution (FI), can totally increase your bank’s value by bringing your current credit card issuing program in house or by offering your customers a card program for the very first time.
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Maybe it seems like a daunting task – designing, building and managing a card-issuing program amid industry giants like Capital One®, Chase® and Citi®. Just the idea of an in-house issuing program invokes panic and questions for many small- to mid-size banks!
- How do I design the program?
- Who will manage the card program?
- Is an in-house card program profitable?
- My small bank doesn’t have an IT team to code this!
- The national issuers already have a stranglehold on card products!
- Why can’t I just use an agent bank or third-party card program?
i2c credit issuing expert, Dan Hanks, spoke with PYMNTS.com about this big idea of bringing credit card issuing in house for small- to mid-size banks and credit unions. In the interview, a common theme emerged: Credit cards [for smaller scale issuers] have largely been used as a defensive tool against larger, national banks.
A defensive tool? That’s right. Think about it – as soon as a customer gets a card from one of the bigger issuers, those big banks are going to start cross-selling to the cardholder customer base – mortgages, HELOCs, auto loans, and even core services like checking and savings accounts.
- Use an agent bank model to get a bank-branded card out there.
- Use a legacy issuer processor and offer a basic credit card.
- Don’t offer cards at all.
Of course, the idea is that by issuing any credit card, smaller banks can guard against losing customers to the big issuers. Still, each one of the above points has major issues.
The agent bank model tends to be the cookie-cutter, one-size-fits-all card approach, which is not what your customers are looking for. The legacy issuers allow you to get a credit card to market, but the features are basic and smaller banks won’t be prioritized when you want to make changes or add features. And, finally, there’s the smaller bank who just doesn’t offer credit cards at all – probably because of the questions and hesitations listed at the beginning of this article.
The Case for In-house Credit Card Issuing
But there’s a case to be made for in-house card issuing – particularly for the community and regional banks and credit unions. Partnering with the right issuer processor can eliminate most of the hesitations that keep smaller FIs from delivering a competitive credit card program.
What if your issuer processor not only helped you design your card program but also had the expertise to manage the program on your behalf? Let’s explore a few myths to set the record straight!
Myth #1: You don’t know where to start when designing a card program.
Consider what kind of card features you think will resonate with your customers, and start a list. You know your customers best. It’s one of the greatest advantages that small- to mid-size banks and credit unions have over the national banks. Tap into that knowledge and design your card program on a sheet of paper or the back of a napkin!
Myth #2: You don’t have the personnel to staff and run a card program.
Would it change your mind to know that, with the right issuer processor, you can set up a program with one or two people on staff in about an hour? That’s not a typo. Most community or regional FIs aren’t able to staff a card program with 10 to 15 people, which is the typical card management team size. But on the right platform, you can design a program and leverage your issuer processor to manage all or some of the card programs.
Myth #3: The national banks are already winning the credit card business.
Not exactly. The card features and controls are winning the credit card business for the national banks. But those card programs, including card controls, card account apps, and cool features aren’t just reserved for national issuers! Your bank has access to the same great features, and you can offer a winning card program directly to the customers who already know you.
Myth #4: The cost of a card program outweighs the benefits of a card program.
There’s a really good reason that the national banks run huge ad campaigns promoting their credit cards. Likewise, that same reason applies to the agent banks who run card programs on behalf of small- to mid-size banks. Credit cards are profitable. Bringing that revenue stream to your bank is a no brainer. A good card program can deepen your customers’ loyalty with your brand, and you won’t have to give away the revenue generated by interchange to an agent bank. Win win.
Dive Deeper Into Credit Card Issuing
We’ve put together an ultimate guide for credit card issuers! Our e-book, “7 Must-have Features for Your Card Program,” outlines the tools you need to build a competitive card program. Even more, it spells out exactly how you can turn a defensive, reactive credit card program into an offensive, revenue-generating program for your bank all while delighting your customers.