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Digital Transformation for Credit Programs

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In the ever-evolving world of financial services, digital transformation has become crucial for financial institutions that want to stay ahead of the competition and meet their customers’ ever-changing expectations. A powerful tool in this endeavor is to bring card issuing and profits in-house.

By implementing a self-issuance credit card program, financial institutions and fintechs can take charge of how their credit cards are managed and provide differentiated products to truly own the customer experience. Consumers benefit from having their financial institution or fintech — rather than a third party — create programs based on the entirety of their relationship across products. Because financial institutions and fintechs are more in touch with their customers, they can use their understanding of what their customers’ financial needs are and personalize their credit programs accordingly.

The Role of Self-Issuance Credit Card Programs in Digital Transformation

A self-issuance credit card program requires cutting-edge features for digital transformation, including digital transformation via virtual cards. Virtual cards are a powerful complement to the traditional plastic that credit card issuers send to customers and are increasingly popular among younger customers. Give your customers the option to quickly activate their virtual cards to start spending within seconds of approval. Your customers can use virtual cards to pay specific merchants or vendors, schedule a one-time use, or even set specific timeframes for use.

This market is increasingly competitive, and small- to mid-sized financial institutions often feel unable to compete with many digital card options currently being offered by larger financial institutions and technology companies.

Virtual cards can be directly integrated into cardholders’ favorite branded mobile wallet applications, such as Apple Pay, Google Pay, or Samsung Pay, through a process known as push provisioning, turning their smartphones or watches into digital payment tools.

Key Features and Benefits of Digital Credit Cards Compared to Traditional Ones

Owning the customer experience in credit cards will be inextricable from controlling a financial institution’s brand, retaining cardholders, and competing for top-of-wallet status. In a study by consultant Oliver Wyman, only 50% of credit cardholders used the same card over a two-year period. Customers who switched primary cards generated almost twice as much net revenue per card, with richer rewards gaining a disproportionate share of switchers.

Consider the following aspects:

  • Differentiation. Many banks realize that owning the customer experience is not only a requirement, but also a path to improving their future growth. Self-issuance allows banks to develop unique products tailored to their customer bases to enhance loyalty and engagement. By owning the customer experience, banks can expand their product offerings and create more dynamic rewards, resulting in more diversified revenue.
  • Hypertargeted, personalized communications. By putting personalization at the core of a new and more differentiated product construct, regional small- to mid-sized banks and credit unions can leverage their proximity and understanding of customers in ways that can be difficult for larger competitors to match.
    • Personalize cards to individual preferences, for example, through the choice of rewards (e.g., cashback, points, or cryptocurrency).
    • Hyperlocalize card programs with rewards and offers that leverage the local merchants and causes customers care about.
    • Integrate and leverage data exchange tactics to achieve hyper-relevance.
    • Develop and implement underwriting strategies that leverage all bank data to make the best decisions for customers and improve the overall experience.

Loyalty and rewards. Retain the customer experience and build brand affinity by delivering loyalty and rewards programs that are highly targeted, personalized, and context-aware. For example, loyalty and engagement tools help financial institutions create and deliver relevant digital coupons, promotions, and rewards that can be redeemed in real time. With this approach, customers can access personalized rewards in-store, on mobile devices, or online — triggered at the right time, on the right device, and in the right place. Create rewards programs with little to no effort, with preset campaigns that leverage real-time access to customer purchases and locations and offer redemptions.

Virtual cards. There are many advantages offered by digital credit cards. Digital cards can be obtained almost anywhere via a mobile phone and can be used instantly. These cards offer greater management tools that make them more secure than traditional cards. For example, they can often be turned on or off using a mobile phone. Other advantages include enhanced spending controls. Plus, tracking provides consumers additional insights into how they spend their money and is a useful tool to better manage their own money.

Digital Transformation for Financial Institutions and Fintechs

By following these steps and strategies, financial institutions can successfully navigate the digital transformation journey, enhance their competitiveness, and meet the shifting needs of their customers in the digital age:

1. Define the strategy. Start by clearly defining the desired outcomes and vision for the digital transformation. This includes identifying specific goals, such as improving the customer experience, streamlining processes, enhancing data analytics capabilities, and increasing operational efficiency.

2. Implement a customer-centric approach. Put the customer at the center of the transformation efforts. Understand their preferences, needs, and pain points to design digital credit card issuing solutions that address their requirements. This may involve conducting customer research, collecting feedback, and using data analytics to gain information on customer behaviors.

3. Upgrade technology infrastructure.  Assess the existing technology infrastructure and determine what upgrades or investments are needed to support the digital transformation. This may involve adopting cloud-based platforms, implementing advanced data analytics tools, enhancing cybersecurity measures, and ensuring scalability to handle increased digital transactions.

4. Develop omnichannel capabilities. Enable customers to interact and transact seamlessly across multiple channels, including mobile devices, websites, call centers, and physical branches. This requires creating a consistent user experience and integrating various touchpoints to provide a seamless journey for customers.

5. Enhance data analytics capabilities. Leverage data analytics to obtain valuable insights into customer behaviors, risk assessment, fraud detection, and operational efficiency. Invest in advanced analytics tools, as well as machine learning and artificial intelligence algorithms, to extract important information from large data sets and make data-driven decisions.

6. Embrace automation and process optimization. Determine which manual processes can be automated to improve efficiency and reduce errors. This may include automating loan origination, credit scoring, document processing, and other routine tasks. Streamline workflows, eliminate unnecessary steps, and implement intelligent process automation to optimize operations.

7. Strengthen cybersecurity measures. With increased digital interactions, credit issuers need to prioritize cybersecurity. Implement robust security measures, such as encryption, multifactor authentication, intrusion detection systems, and regular security audits. Stay updated with evolving security threats and comply with relevant data protection regulations.

8. Foster partnerships and collaborations. Collaborate with fintech companies, technology providers, and service partners to leverage their expertise and innovation. Explore partnerships to enhance your digital offerings and augment your team, which, in turn, can accelerate the time to market and scale.

9. Upskill and reskill employees.  Provide training and development programs to equip employees with the necessary digital skills. This may involve providing training on new technologies, data analytics, cybersecurity best practices, and customer-centricity. Empower employees to become champions of change.

10. Continuously iterate and improve. Digital transformation is an ongoing process. Regularly assess the effectiveness of digital initiatives, gather feedback from customers and employees, and adapt strategies accordingly. Embrace an agile mindset that allows for continuous improvement and innovation.

11. Keep compliance and regulations in mind. Credit card systems are subject to various compliance standards and regulations, such as the Payment Card Industry Data Security Standard (or PCI DSS). Businesses must stay updated with these requirements to maintain the security and integrity of credit card transactions, so be sure to keep yourself educated on any regulation changes.

12. Create clear policies for handling chargebacks. Establish procedures to handle customer disputes and chargebacks promptly. Effective communication, diligent record-keeping, and strong dispute resolution strategies can help mitigate these challenges.

Self-issuance credit card programs are great catalysts for digital transformation for financial institutions. By embracing these digital credit solutions, institutions can elevate their customer experiences, offer targeted and personalized communications, foster loyalty through rewards, and leverage the advantages of virtual cards.

Ultimately, self-issuance credit card programs empower financial institutions and fintechs to not only survive but also thrive in the digital age by meeting the ever-changing needs of their customers and delivering exceptional and personalized financial experiences. Also, they can quickly launch credit card programs to capture all available revenue and increase profitability.

To learn more about how digital transformation can help your financial institution or fintech keep up with customers’ needs, contact us today!

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