New restrictions from the Credit Card Accountability, Responsibility and Disclosure Act and the potential for downward pressure on credit and debit card interchange are forcing issuers to look for smarter ways to increase revenue and strengthen consumer loyalty.
Issuers must find ways to maintain credit cards’ relevancy as debit card usage steadily increases, Dennis Moroney, research director of bank cards for TowerGroup, said during a panel discussion at Source Media’s Card Forum and Expo that kicked off Monday in Orlando. Debit card transaction volume and market share for most issuers grew significantly during the past year, Moroney said.
One path to driving greater credit card usage is for issuers to use technology to analyze customer behavior in order to market credit cards more effectively to existing bank customers. “There is a lot of lip service paid to relationship-building; technology can help this,” he said.
Instead of cutting rewards or loyalty programs, banks should consider customizing their rewards and incentives and getting away from a one-size-fits-all approach, panelist Beth Robertson, director of payments research with Javelin Strategy & Research, said. “Banks need to look at their customers and assess what kinds of rewards consumers are redeeming.” Rewards should be designed to suit customers’ preferences based on their age and income as well as their spending habits and education level, Robertson tells PaymentsSource.
Additionally, giving consumers improved financial-management tools may pique their interest in credit cards, Ron Shevlin, a senior analyst with Aite Group, told audience members during the panel. Discover Financial Services is one example of an issuer harnessing free, online personal financial management tools to more effectively market its credit cards, Shevlin added.
Moreover, issuers need to do a better job of meeting customers’ unique payment needs. One example is the emerging concept of “hybrid” cards. Such cards enable consumers to decide where, when and how they want their money spent from various savings, debit or credit accounts that are all linked to single card. The main challenge with these products is designing the cards to suit the needs of consumers of different ages and incomes. Consumers over 35 have distinctly different spending patterns and needs than younger consumers, Shevlin said.
Indeed, issuers have a long road ahead to overcome a variety of challenges facing them. And while there is never a shortage of ideas, Moroney said, it’s important for issuers to conceptualize these ideas and really begin to engage consumers in a new way to remain profitable.
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