This is a true story. In August, I was flying home on a major airline when the flight attendant interrupted the completion of my crossword puzzle and urged me to apply for the airline's credit card. He talked in detail about its features and benefits and then proceeded to walk down the aisle offering applications.
Aside from all the other comments one could make about that experience, why would it be so important for the airline to get me to apply for its credit card? You know the answer-to sell more product, in this case, airline seats.
But it just as easily could be shirts, jewelry, computers, socks or furniture. In other words, the card is a window into my purchasing heart, and any retailer worth its salt is doing everything in its power to seduce me.
Now, let's talk about account-processing strategies. What, are you thinking, does one thing have to do with the other? Everything. Because every dollar spent on information technology is a dollar lost to selling. Every moment spent on an IT need is time spent away from figuring out how to win over my buying heart. So what could be more important to talk about?
The question every private-label issuer has to answer is whether those credit accounts should be processed in-house or be outsourced to a third-party company. Generally, the argument goes something like this:
If I process my receivables in-house, I have total control over my portfolio and the systems that support it. Turning that control over to a third party is risky. On the other hand, by turning my processing over to a more expert, more predictable cost partner, am I better able to utilize those resources to focus on gaining market share?
Unfortunately, there is no one size that fits all in life. So here are a few things to consider if you are a private-label issuer considering whether to outsource your credit processing services.
If you process in-house, is the software you use going to keep up with your growth plans and market trends? Will you be able to successfully predict your total cost of ownership over an extended time period? Which additional audit or security requirements will be necessary to have in place? Aside from the core application, what ancillary products or services will you need to understand and support? How is your unit cost impacted when your business expands?
If you are considering using a third-party processor, is the company you are evaluating experienced in your market? How much influence will you have on the servicing and growth strategies for your portfolio? Do they have a well-defined product management strategy that will keep up with changing market landscapes? Does their cost model adapt to your market's growth projections?
And don't forget that that it is not necessary to make this decision purely black and white. Sometimes the best strategy is one that brings together the best components from both an in-house and outsourced processing model.
Just make sure when you are deciding on the best processing strategy for your portfolio that whether you select in-house, outsource or something in between that it can stay in step with your marketing strategies, can offer appropriate cost controls and is focused on making your organization successful as a credit issuer.
Private-label products will always have a place in our market. There is no better way to capture market share than by establishing a persistent buying relationship with your customers.
So, by the way. Would you like some peanuts with that application?
Patricia Hewitt is vice president of business development for Fiserv Credit Processing Services. Fiserv CPS has served the credit management industry since 1990 and offers a full suite of products and services. Patricia can be reached at patti.hewitt
(c) 2005 Cards&Payments and SourceMedia, Inc. All Rights Reserved.
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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