Credit Card Retention Strategies


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Credit Card Retention Strategies

  1. 1. Credit Card Retention StrategiesReport Details:Published:September 2012No. of Pages: 124Price: Single User License – US$3800Synopsis•The report illustrates the significance of the credit card business for banks•The report explores customer retention in the credit card industry – both in general and in light of present conditions•It discusses best practices in developing and implementing a successful retention strategy for global issuers•The report also looks at the areas which pose the biggest threat to customer spending on credit and debit cards, notably online payments rivals like PayPal and Bill Me LaterThe search for innovative card products has been a major focus in the past decade. However, theimportance of customer retention for credit card issuers has grown in the wake of the globaleconomic slowdown. The switch towards debit and cash spending in mature markets, theemergence of a range of new payment channels, increase in legislation and the continuing trendfor customers to reduce consumption all present significant obstacles to the credit card industry.Credit card issuers in the US took drastic measures during the recession, such as making it harderfor consumers to compare credit card offers online and more expensive to transfer balances toother providers. Issuers also cut back their cooperation with comparison sites and raised fees forbalance transfers. While such actions were stop-gap measures, and not necessarily indicative ofmature retention strategies, they do attest to the increasing importance being placed on cardretention in today’s economic climate.Scope•The report illustrates retention strategies for acquisition, portfolio management and anti-attrition segments of the credit card life cycle•It includes examples of best practice programmes, strategies and channels that have been used to support each phase of the credit life cycle with further analysis of the strategies that worked, the strategies that didnt, and why•It assesses and recommends which data tools you can use in order to improve retention•It demonstrates how marketing, customer service and risk management can be better aligned to work together more effectively to enhance retention•It shows how marketing can be improved, with special emphasis on how better segmentation can yield better results
  2. 2. Key highlights•Credit card business normally provides a return of three to four times the cost of equity in markets like the UK and the US.•Though the profitability of the US credit card industry declined a little during the recession, profitability started showing signs of recovery to pre-recession levels in 2012.•Credit and debit cards are still used for four out of five payments online, but that share is steadily declining.•Successful retention strategies encompass an organizational vision including an agreed set of goals to which all components of the credit card organization agree including, profit, and other key metrics.Reasons to buy•Gain insight into the various credit card retention strategies adopted by issuers across globe•Measure the success of retention strategies•Understand the relevance of credit card customer retention•Develop credit card customer retention strategies and measure ROI for the same•Understand and develop suitable product and pricing strategies for customer retentionGet your copy of this report @ points covered in Table of Contents of this report includeTable of Contents1 Executive Summary2 The Significance of the Credit Card Business for Banks2.1 Profitability of Credit Cards2.2 Interest Income2.3 Non-Interest Income2.4 Fees2.5 The Importance of Payments in the Customer Relationship2.6 Country Survey: The UK3 The Importance of Credit Card Customer Retention3.1 The Favourable Economics of Customer Retention3.2 Retention as a Response to Competition and Regulation3.3 The Impact of Regulation on Card Profitability3.4 Retention as a Response to Alternative Payment Systems4 Understanding Customer Retention4.1 Defining Customer Retention4.2 Customer Engagement and Retention4.3 Economic Defection5 Life-Cycle Management5.1 The Market Life Cycle5.2 The Card Life Cycle
  3. 3. 6 Setting the Retention Strategy7 Measuring the Success of the Retention Strategy8 Understanding Customers8.1 Customer Segmentation8.2 Data Mining and Retention Prediction Tools8.3 Fractal Analytics – Case Study8.4 Listening to Customers8.5 JPMorgan Chase’s facebook marketing initiative8.6 The Visa Business Network on Facebook8.7 American Express – Open Forum9 Retention and Organisational Structure10 Retention and Marketing10.1 Using acquisition to enhance retention10.2 Using Word-of-Mouth Marketing to Enhance Retention10.3 Using Branding and PR to Enhance Retention10.4 Best practices in engaging customers with social media10.5 Using Rewards and Promotions to Enhance Retention10.6 Merchant-Funded Rewards10.7 Payment Information Value Added Services (PIVAS)10.8 Using Activation and Usage-Stimulation Programmes to Enhance Retention11 Retention, Product Design and Pricing11.1 Retention and Product Design11.2 Personalization and Customization11.3 Pricing and Retention12 Retention and Credit Risk Management13 Retention and Customer Service13.1 Customer Service and Engagement13.2 Bank of America – Customer Service on Twitter13.3 Customer Service and the Mobile Channel14 Retention and Credit Card Payments14.1 Customer Retention in POS Credit Card Payments14.2 Customer Retention for Online Credit Card Payments15 Appendix15.1 Methodology15.2 Contact Us15.3 About Timetric15.4 DisclaimerList of TablesTable 1: Return on Assets, Large US Credit Card Banks, 2001–2011 (%)Table 2: Average Most Common Interest Rates on Credit Card Plans (2000–2011)Table 3: Proportion of Non-Cash Payments (in Volume Terms) by Payment Type in the UKTable 4: Number and Value of Transactions – Debit Cards
  4. 4. Table 5: Number and Value of Transactions – Credit and Charge CardsTable 6: Visa Interchange Fees for Selected UK Payment MethodsTable 7: Account Life-Cycle ManagementTable 8: Example – Prime vs Sub-Prime PortfoliosTable 9: US Card Issuer Account BenchmarksTable 10: Major differences – Prime and Sub-Prime SegmentsTable 11: Examples of Possible SegmentationTable 12: Possible segmentation strategies, example 2 (Source: VRL KnowledgeBank)Table 13: External view of a European market (* signifies total number of cards (issued)Table 14: Activation and Usage-Stimulation ProgrammesTable 15: Retention Tactics in Usage-Stimulation ProgrammesTable 16: Successful product upgrade timings (Source: VRL KnowledgeBank)Table 17: Successful cross-selling strategiesTable 18: Comparison of Online Panels and Online CommunitiesTable 19: Example of Basic Segment Product FeaturesTable 20: Pricing and EnhancementsList of FiguresFigure 1: Non-Interest Revenue as Percentage of Assets for Credit Card Lenders and OtherConsumer Lenders, USFigure 2: Debit Cards in the UKFigure 3: Credit Cards in the UKFigure 4: Charge Card Volumes in the UKFigure 5: Marketing Needs to Align to ProfitFigure 6: Screenshot of PayPal Home Page (Source: PayPal)Figure 7: Screenshot of Bill Me Later Homepage (Source: Bill Me Later)Figure 8: Correlation Between Primary Card Designation and Share of Spending, 2007Figure 9: Cardholder Satisfaction vs Average Card SpendFigure 10: Ron Shevlin’s Schema for Measuring Engagement to help Marketers Understand TheirCustomersFigure 11: Relationship Between Bank Customer Engagement and Purchase IntentFigure 12: The Credit Card Market Life Cycle – Different MarketsFigure 13: Life-Cycle Management – European ExamplesFigure 14: Life-Cycle Characteristics of Main Stages of Market DevelopmentFigure 15: Key Strategic Imperatives in a Growth MarketFigure 16: Steps in Setting a Retention StrategyFigure 17: Example of a Detailed Timetable of Risk Management and Collections RolloutFigure 18: Example of a Strategic Assessment of Current Position of Retention Skills Relative toDesired Future PositionFigure 19: Segmentation Model of Revolvers and TransactorsFigure 20: Segmentation Comparison: Revolvers vs TransactorsFigure 21: Understanding Customer Segment ProfitabilityFigure 22: Screenshot of the Chase +1 Facebook Page
  5. 5. Figure 23: Screenshot of the Visa Business Network Facebook Login PageFigure 24: Screenshot of American Express Open ForumFigure 25: Cards Organization StructureFigure 26: Consumer Credit OperationsFigure 27: Relationship Between Customer Spend and AttritionFigure 28: The Wells Fargo Wachovia BlogFigure 29: Promotion for Citibank Cardholders at a Singapore RestaurantFigure 30: Promotion for HSBC Cardholders at a Singapore Gas StationFigure 31: Promotion for American Express Cardholders in the UKFigure 32: PayPal’s FanclubFigure 33: Selected Results from Welcome Real-Time’s Card Payment Promotions SolutionFigure 34: Example of Coupon from Chockstone’s SingleSwipe SolutionFigure 35: Checkout by Amazon Cart Up-Sell StepsFigure 36: Screenshot of the Winning Entry in the Caisse d’Epargne Visa Card Design ContestFigure 37: Screenshot of Flexi SiteFigure 38: Screenshot of Capital One Card Lab HomepageFigure 39: Screenshot of the Bank of America Twitter pageFigure 40: Oyster – Contactless RFID CardFigure 41: The Octopus CardFigure 42: Suica CardFigure 43: Oyster CardFigure 44: Barclays Contactless CardContact: for more information.