Three Steps to Building a More Profitable Card Program
By Kelly Payne
(Reprinted with permission from Business Bank News. Original article published on September 14, 2021 and can be viewed here.)
Low interest rates mean financial institutions need new revenue sources. Luckily, cards and payments are a fast-growing revenue opportunity for banks today. For instance, according to a 2021 Pulse Debit Issuer Study, in 2020 average annual debit card spend was $13,550 with average ticket size rising to almost $45, both 16 years highs. Likewise, according to Juniper Research, spend in digital wallets is projected to increase 83% by 2025 due to adoption of digital payments during the pandemic.
With that much growth potential in store, banks must look inward and determine how they can adjust their payments strategy and build a more profitable card program.
Determine Current Gaps and Opportunities
The first step banks should take is an audit of their existing programs. This is how they will determine the current gaps in service, which will illuminate opportunities to close those gaps and grow a better card program.
Banks must ask themselves how much revenue the current card program is driving and what the revenue trend looks like. Is it increasing or decreasing? Additionally, banks must consider if the wallet share, or transaction volume, of the bank’s current cards is increasing or decreasing. If it is decreasing, by how much? And who do customers turn to when they make payments outside the bank’s network?
Finally, a bank needs to ask itself what payment options it can support today. These options should at a minimum encompass virtual cards, P2P payments, purpose-driven cards that are targeted to specific audiences and needs, and digital wallets.
Fill Gaps and Diversify Offerings
No one solution will solve everyone’s needs. Each customer has different payments goals and expectations. A bank’s card offerings should be more than simple credit and debit options. Cards should go deeper and give customers solutions for their specific payments needs.
Some customers will be looking for business solutions while others may want cards that work for their whole family. Other customers may be looking for cards with the best rewards and perks. Having a diverse solution set that caters to a wide array of needs is more profitable for a bank than a one-size-fits all approach.
The research done above should provide a road map of the audience needs. To determine which products to focus on, banks should analyze how their customers spend. Look at transaction data and look for trends. They should review customers’ spending behaviors by channel. Then, they can build campaigns to target the most profitable or most engaged customers and spending patterns.
With all of this information in mind, the bank must then determine if it can build its own new card offerings to fill existing gaps or if a partner is needed to bring new card and payment capabilities to life.
Actively Market to Increase Card Adoption
The goal is to become the default card of choice for customers. Banks need customers making everyday purchases on their cards in order for the bank to see the interchange revenue they want. The key to being top-of-wallet is staying top-of-mind through consistent and meaningful communication.
When onboarding new users, banks must communicate frequently. This is how they will see card adoption and engagement grow. It is important to use every communications channel available to ensure they are reaching each user, as each one will have slightly different communication preferences. For example, while some may frequently check their emails, some might prefer notifications from the bank’s mobile app, where they are already interacting on a regular basis.
A good onboarding and follow-on communication strategy can make or break a card program. A series of communications to educate the new card holder on the benefits of using their new card can move it from bottom of the wallet to the top. Ongoing, relevant communications can keep it there. People need to hear messages repeatedly – as many as seven times – to make them stick.
With the right strategies in place, banks can take their card programs from “nice to have” to a strategic differentiator. By looking inward, filling any gaps, and marketing their card programs, banks can create an attractive, lucrative card program that keeps them top-of-mind and top-of-wallet and provides an important stream of non-interest income.
Kelly Payne is Chief Marketing Officer for MOCA, a digital-first next-generation card-based payment platform provider founded and managed by community financial institution and payment industry veterans.