Grow Your Portfolio With Technology, People, And Marketing

By Keith Floen

The nation’s top 20 credit card issuers continue to expand market share and improve earnings. In 2003, large issuers enjoyed a 10% annual growth rate, while about two-thirds of credit union credit card portfolios experienced revolving balance attrition and declining profitability. Large issuers make continuous strategic investments in technology, people, and marketing. Credit unions must do likewise.

Technology
It's critical to make decisions and take action based on facts. An integrated credit card decision support and database system is a fundamental tool leading credit card issuers use. Such a system combines member performance with time series data, prospect mailing information, credit data, transaction history, demographic overlays, and marketing customer information file data. This information can be used for reporting, modeling, and forecasting risk. Timely and user-friendly information from your cardholder processing system allows for more effective cardholder servicing and more cost efficient operations.

People
Without experienced operators, even the best technology won’t create top performance. The more managers know about credit cards, the better off the credit union will be. Any weak link in the organization weakens portfolio performance. Focus more attention to the strategic and tactical activities required to manage the credit card business. Remember, the top 20 issuers each have thousands of experienced employees thinking only about improving credit card performance.

Marketing
The right technology and people will give you the confidence and the data to market your credit cards aggressively. This involves all areas of the credit union and includes:

• Lending managers promoting credit lines to creditworthy members;
• Member service representatives marketing the right card products based on members’ lifestyles and needs;
• Operations enabling the credit union to evaluate and price performance at the individual account and transaction levels;
• Call center staff with the authority to match competitors’ offers, approve higher credit line requests, and switch members to products that best suit them, such as low-rate cards and cash-back or points-based rewards programs;
• Collections educating members and accommodating those with minor problems; and
• Finance ensuring equitable pricing is in place for all products and members, and that cardholders with revolving credit don’t subsidize transactors.

Marketing must target new accounts, retain existing accounts, and activate dormant accounts. This takes continuous investment. We suggest a minimum of 100 basis points of the total portfolio size you’re trying to achieve. For example, if you want to expand a $5 million portfolio to $10 million, you’ll need to invest $100,000 annually for marketing. This investment excludes the added costs associated with rewards and cash-back rebates. Remember, top issuers spend more than $1 billion annually on marketing, so your commitment to marketing must be continuous.

Another option: Entering into a credit card lending alliance allowing the credit union to access the technology, people, and marketing resources large issuers have. Alliances simultaneously expand the service level to members, provide immediate access to robust products, promote the credit union brand, transfer risk, and generate revenue.

Keith Floen is managing director for Atlanta-based InfiCorp. Contact him at 404-965-6040.