Dynamic Credit Card Programs Can Help You Grow


We hear it more and more from our clients: regulatory changes, cost compression and competition are forcing financial institutions to seek new avenues for revenue generation. But do any untapped opportunities for generating new revenue actually exist?

It's somewhat obvious, but payments really do pay. In particular, credit card programs can pay significant benefits to your institution, from generating new income streams and increasing cardholder loyalty to capturing new markets.

Credit card programs can pay significant benefits to your institution, from generating new income streams and increasing cardholder loyalty to capturing new markets.

The recent economic recovery has led consumers to increase their spending – and reach for their credit cards. Financial institutions are also willing to extend more credit than they did during the recession, as evidenced by a 4 percent increase in card balances in 2014. A new study from Raddon reveals overall credit card transactions and balances are trending upward, with nearly 40 percent of our everyday spend now captured on credit cards.  

Although card programs are already a well-established revenue source, changes in credit card access and usage are driving additional growth. Significant opportunities are available for card issuers to increase market share and grow revenue.

Benefits of Dynamic Credit Card Programs
Issuing institutions stand to benefit from credit card programs in several ways, primarily from fee-based and interchange income opportunities, which are unimpeded by the Durbin Amendment. Of course, financial institutions must be mindful of the restrictions on how interest rates and fees can be assessed and how credit limits can be changed.

Many financial institutions now view debit and credit rewards programs as essential to retaining customers and members, rewarding loyal users and adding value as they work to differentiate themselves from their competitors. Issuing credit cards with integrated value propositions enables financial institutions to meet consumer needs while growing their portfolios.

By putting significant buying power directly in a cardholder's hand, credit card programs encourage loyalty for financial institutions. Customizing offerings to the unique needs of cardholders through loyalty and rewards programs builds revenue and helps financial institutions shape future business growth. Financial institutions should take full advantage of program design flexibility to distinguish their organizations, foster a consumer-centric brand image and retain customers and members.

Market Opportunity and Optimization
What seems like an easy decision – to issue credit cards to willing consumers – becomes a significantly more complicated proposition when current market forces are considered. In a continually evolving payments landscape, financial institutions must compete with larger card issuers because cardholders – both individual consumers and businesses – have more choices than ever to pay for goods and services. Adding in the need to identify appropriate risk solutions, rewards programs and cardholder services leaves financial institutions with several important decisions to make.

If your organization is starting a new credit card program or you want to optimize your existing credit card portfolio, you must understand your financial institution's strategic focus, goals and business challenges. Specifically:

  • Analyze your market and cardholder data
  • Establish a hands-on portfolio management strategy with distinct lines of responsibility
  • Implement industry best practices and major-issuer proven methods
  • Tailor your program strategies for your card base       
  • Price your credit card program competitively      

The credit card marketplace is filled with opportunity for issuers of every asset size. When financial institutions offer compelling and properly positioned products, they can compete and win against even the largest issuers. A carefully crafted product and implementation strategy can secure market share and grow your portfolio, enhancing consumer loyalty, driving revenue growth and keeping nonfinancial players from disrupting account relationships.

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