Insights

Financial Institutions: Helping Customers Bounce Back from Payment Adversity

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Jun 16, 2020

We can’t be certain this is true for all, but we haven't spoken with one financial institution's payments executive recently that had 'global pandemic' covered as part of their firm's contingency plan

How could anyone have anticipated an event that could change the world and its economies so suddenly and decisively? And card issuers are like first responders, entrenched on the front lines with their customers.  And, despite weeks of action, they still have a huge list of challenges to address in coming months.  So, what actions should issuers be taking to alleviate some of these issues? We polled our team of payments experts, and came up with a handful of suggestions. 

Digital Banking and Commerce should be the #1 priority 

According to McKinsey, digital commerce in some markets has risen by up to 80% since February and much of this shift in behavior is likely to remain for months to come if not longer.   Banks and issuers should be focused on enabling and promoting all digital payment capabilities across their customer bases to maintain activity and capture market share on their platforms and products.  

 

Respond Strategically to Interchange Rate Changes 

Visa and MasterCard have both announced plans to freeze interchange rates globally for at least the next several months.  Meanwhile the mix of consumer spend in card portfolios has been hugely affected by near shutdown in travel, restaurant dining and other high interchange categories.  Issuers should analyze transaction data carefully or work with their partners to determine which transactions still in play will optimize interchange revenue which should help them devise programs to incent spending in these categories. 

 

Demonstrate Support for Customers 

Many customers are either out of work or working reduced hours which will make it difficult to keep up with household expenses – including card and other loan payments.This is likely to continue for months, adding more pressure to your financial institution and your customers. Delivering clear messages of support through this crisis will resonate strongly, and when things improve, your customers will remember how you supported them in hardship.  

 

Pivot Product Features and Marketing to Address Changes in Spend Patterns 

Our issuing clients have experienced significant activity drops in travel and leisure spending, however, people are still buying groceries and other critical products. Issuers should focus their rewards, bonuses, promotions, and other marketing on the categories that their customers must continue to buy and those that they want to buy.

Even with steep drops in high volume spend categories, there is an opportunity to enhance your share of those purchases that are happening. 

 

Focus on Expense Reduction 

With revenue falling across multiple product categories, take a hard look at reducing your expenses in order to improve profitability. Your team may be burning both ends of the candle right now supporting customers and maintaining the business. If you don't have time for the painstaking work of analyzing your operations, loyalty, and expenses, it's time to leverage a partner to do it for you.

With revenue dropping across multiple product categories, consider taking a harder look at some expense categories which could help support profitability. Your team may be flat out trying to support the business and your customers so now could be the time to leverage partners who can help dig into hard-to-analyze categories such as operations, loyalty and expenses. 

As we continue to listen to our clients over the coming weeks and months, we will share more insights with you. The banking and payments landscape continues to evolve, and we are intent on helping our clients focus on their priorities and successfully navigate this new normal.

 

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