Many issuers typically care about transaction volumes because of the nature of their revenue models that are driven off of the interchange and potential interest generated on the transactions. However, issuers have an opportunity to accrue additional value off of these transactions and increase their profitability if they correctly leverage the data generated. In the first two blogs of this four part series we talked about why a credit card portfolio still matters and how you can use credit card rewards as a competitive advantage.
Data is a valuable asset for credit card issuers
Data from credit card transactions are an invaluable asset that can allow issuers to develop deep insights into cardholder purchase patterns, needs and behaviors. This data can enable issuers to tailor their card programs to customers. Every transaction, no matter the size, provides rich information on the who, what, when and where of cardholder behavior. Marketers can perform advanced segmentation, slicing and dicing the data to understand customer needs across geographies, income, age, and other attributes. Using these insights to devise individualized rewards and offer strategies, modern credit card issuers can effectively target customers whose needs are not met with their current offers.
Harnessing the power of that data across similar customer segments and stitching that with their account related data, such as information collected during account opening, could unlock powerful insights and could tell issuers what works and what does not. This data can hold the key to their winning strategies.
Marketers should leverage data for customer acquisition and retention
Past limitations to segment their customers and analyze their customer behaviors previously forced issuers to rely broadly on three types of credit card features: rewards, low interest rate and secured. These limitations made differentiating themselves from one another difficult and forced many to spend millions on marketing and advertising campaigns to acquire and retain customers.
Another important lever for marketers is experimentation. Using a modern card issuing platform gives issuers an opportunity to quickly and compliantly launch experiments on new reward or offer strategies, allowing them to react to market competition and seize opportunities to turn non-spenders and low spenders into active users.
Mitigating credit card fraud
Fraud is one the most prevalent problems in the industry and every issuer should try their best to detect fraudulent transactions. Issuers can and should leverage large datasets of transactions and apply more sophisticated models to find anomalies. Data models and rich data have the potential to help issuers with better fraud decisioning, decrease false positives and could offer higher rates of successful transactions without impacting the customer experience.
Data to help revenue teams understand portfolio performance
Monitoring credit card portfolio performance is crucial to knowing whether or not the card is adding value to the business and its growth. Making revenue while balancing risk is the goal for any credit product and data is key to achieving the goal. Data on whether or not the portfolio is growing by accounts, balances, credit utilization, fee income and interest income along with understanding payment patterns, charge offs, and non-performing accounts is important to assess the quality of the portfolio.
Being able to easily obtain these performance metrics through a dashboard or user interface UI, can allow revenue teams to come up with strategies to reposition the program so as to outperform their competitors. This could provide issuers with the knowledge needed to tweak pricing through fees, APRs or perform account management to enhance the performance. Making strategic and impactful portfolio decisions based on cardholder behavior data can help you better position your offerings and increase cardholder spend.
Building a modern credit card program
In our next and final article in the series we share how you can optimize your credit card program for a digital first world. Learn more about building a modern credit card program in our eBook. Ready to talk to a credit expert on ways a credit card program can help you build loyalty with your customers? We are here to help you harness the power of data.