By Jennifer Davis
A credit card portfolio can be a community financial institution’s most profitable product. Up to a quarter of a credit union’s net income can come from this one portfolio. Yet, its potential is often overlooked.
Should a financial institution’s portfolio slip into a status quo position, often the best way to initiate change is to engage an outside perspective. SAC Federal Credit Union did just that when it found itself managing a credit card program that had been virtually untouched for seven years. Payment processor TMG and its SmartGrowth team of portfolio strategy experts were the resources SAC needed to review its credit card program and reveal opportunities for achieving the cooperative’s growth goals.
A credit card portfolio review can be an overwhelming task given all of the other duties cards teams manage day-to-day. The review will take time, as will understanding the tweaks – or 180-degree turns – the findings necessitate. For this reason, a strategic partner or advisor outside the financial institution can be especially critical.
Upon completing a portfolio review, financial institutions would do well to consider developing their strategic next steps based on the five categories of the cardholder lifecycle. Those categories consist of:
- Product – Cards teams should design a compelling product that takes into account the features, terms and conditions offered by those issuers going after the same segment(s) of consumers.
- Account Generation – A plethora of channels are available to drum up new business. Choosing the best ones and developing an appropriate compliance strategy is key in this stage.
- Activation/Usage – The first 60 days of a new account are the most important time in the cardholder lifecycle. This is when card activation occurs, as does the best chance of earning top-of-wallet status.
- Account Management – The goal in this stage should be to stimulate purchase activity and balance growth.
- Service – In today’s Age of the Consumer, the voice of the consumer has a better chance of being heard and applied than ever before. For this reason, cards teams can’t overlook the importance of consistent and friendly cardholder service.
Upon receiving the results of its portfolio review from TMG, SAC developed a five-pronged plan to execute the recommendations. Each piece of the plan included strategies for optimizing the consumer experience. Executing simple initiatives like revising its pre-approval criteria, deploying an annual re-activation campaign and empowering cardholder service personnel to make in-the-moment decisions helped SAC move the needle on its card portfolio. With TMG’s SmartGrowth team, SAC experienced 75 percent portfolio growth and nearly quadrupled penetration.
Taking a step back from the day-to-day to listen to the tales a card portfolio has to tell can deliver incredible insights and, with the right partner, real solutions. SAC is just one example of a financial institution that reignited its card program with a few minor adjustments.
Those simple tweaks can turn credit cards into the type of products that spark the loyalty of existing cardholders – and bring new ones through the door.
Jennifer Davis is VP of TMG’s SmartGrowth solution.