In recent years, pandemic-related issues and the risk of financial stress have contributed to declining credit card satisfaction.
Can't Get No Satisfaction
This has been especially true for midsize bank issuers facing challenges connecting with digitally savvy and demanding customers in an uncertain economic environment.
While channel capabilities have been greatly enhanced in recent years by issuers up and down the size spectrum – enabling customers to conduct most activities on a mobile device or laptop – the need to create personalization and ease of functionality is paramount to future success. And, while many banks do a great job proactively educating customers about the capabilities and functionality available, others may be stuck reacting to user performance issues, which can lead to higher abandon rates, lower customer engagement, and drag on growth.
So, what are some core issues inhibiting customer engagement with your card offerings, and what steps can you take to address them? How seamless is it for your organization to acquire and onboard new account holders?
Rewards no longer seem so…rewarding
The largest issuers are constantly tweaking their rewards offerings both to make them more compelling but also to continue to drive customer engagement. Meanwhile, loyalty programs can be pricey and one of the most significant expense items for an issuer, with consumers demanding ever-richer offers, meeting that demand requires the need to offset the cost. And, with a smaller revenue base to spread the costs, midsize issuers may find it challenging to compete effectively.
Devising engaging and timely strategies is one of the most important and proactive steps card portfolio managers can take. Marketing teams can create unique personalized offers to drive spending and burn off loyalty liability, which can reduce drag on future performance. Issuers can also focus on differentiators and build relationships with local merchants who have deeper ties to their geography, essentially developing a home-field advantage versus national brands.
Take Advantage of Lower Acquisition Costs
With the evolution of mobile and digital, acquisition costs are a fraction of past relied-upon approaches. Issuers need to develop and manage campaigns that are geolocation driven, linked to merchant partners, and relevant and timely for consumers. Effective and consistent analysis and use of spend and account behavior data can ensure offers are relevant and drive increased usage.
Hold Serve on Customer Experience
The largest issuers and the Fintech entrants in the space are setting a higher experience standard. Midsize issuers must stand their ground through technology enhancements, not only providing the service but testing the user experience. The continued evolution of digital channels is a must as new payment options and products such as installments and BNPL flood the market.
Customer Engagement – Work Smarter, Not Harder
Most midsize bank and credit union issuers have significantly lower activation, engagement, spending rates, and balances and are perceived to attract based on rates. Simply put, getting more customers engaged early is the foundation for improving long-term portfolio performance, and here are things we would recommend as focal points.
- Evaluate and enhance the early-day approaches. How easily can your newly acquired customer get and activate their card, and what happens next?
- Focus on strategies to engage customers and drive ongoing activity. Avoiding one-and-done programs can be a starting point.
- Reviewing performance data for debit active clients, spending, paydown trends, and even dormant accounts can help issuers develop more effective acquisition, and engagement approaches.
- Provide cards to meet each customer's needs and spending behavior. If the customer wants one card for all purchases, a cash rewards card might make sense. If they prefer compartmentalizing spending, perhaps a travel or merchant reward card is a better fit. A balance of products for a portfolio is needed. However, too many can quickly become costly to maintain and grow.
While driving significant performance growth can seem like a daunting mountain to climb, issuers do not have to go it alone. Improving customer engagement should be a team effort, including enlisting a partner like Profit Insight with the industry expertise and analytic capabilities to marry client spending and payment behavior to market best practices. Profit Insight has spent 50 years helping our worldwide clients uncover efficiencies and drive earnings improvement by implementing our tactical recommendations. Let’s take the next step together.