The typical credit card weighs less than 0.02 ounces, yet the logistical task of delivering one in many emerging consumer markets can be anything but lightweight. Delivering new credit cards to recently approved and renewing cardholders presents some very weighty challenges and can cause significant revenue leakage for banks in emerging markets.
In the recent case of one South American bank, 35% of all new and renewed cards were failing to arrive to their intended recipients within 60 days of the card being issued. As a matter of this banks policy, these cards 270,000 a year in all had to be shredded at an annual cost of $1.3 million.
But by identifying the root cause of delivery delays and miscues and developing a detailed monitoring system across the entire card issuing lifecycle, new methods were devised for managing operations and optimizing the delivery channel workload. The ultimate goal of these efforts is to improve the rate of successful card deliveries from 65% to 85% in 6 months and to 90% within a year.
To benchmark this banks challenges against peer institutions, big data resources were used to analyze ways that application, underwriting and issuance processes can be optimized. That was combined with the firsthand knowledge of card delivery processes from a team member who worked at a bank in Asia that faced a nearly identical operating and regulatory environment, but was able to raise its card-delivery rate to 95%.
In both markets, mail-driven card delivery presents heightened risks atypical of mature markets like the U.S., where stronger systemic safeguards against card activation fraud make postal delivery a relatively riskless proposition.
Mailing a credit card and instructing the lawful recipient to activate it by phone using a government-issued ID number the standard activation protocol for 181 million U.S. cardholders presents too high a fraud risk in most developing markets in Latin America, Asia, Eastern Europe, the Middle East and Sub-Saharan Africa.
Moreover, in the case of the South American country that this bank operates, it is customary for consumers to write down their government-issued ID numbers on widely-handled documents, such as restaurant receipts meaning it would be relatively easy to steal a consumers ID number and fraudulently activate a card thats been delivered through the mail.
To mitigate this heightened fraud potential, cards in this South American country must, by law, either be couriered to the intended recipients doorstep for signature, or be delivered to a local bank branch for the consumer to pick up. Furthermore, cards must be delivered to the authorized user or formally-designated proxy.
Typically, initial credit card sales were sourced through calls and cross-sold thru co-branded models with contract couriers and bank branches, which then assume responsibility for card delivery and receipt by applicants. But these methods suffered from poor work stream hand-offs, lack of ownership and no focus on applicant dropouts; consumers that initially apply for a card, but change their mind during the protracted delivery process.
To address this, delivery processes were scrutinized beginning with the consumers viewpoint at origination, which allowed analytics and reengineering consultants to map and evaluate end-to-end workflows across sales, operations and delivery to identify the root cause of delays and miscues.
As a result, there were a number of new processes put in place to help the bank improve its delivery rate. First, sales representatives began capturing accurate and complete information about when and where consumers are available to accept delivery of their cards. In addition, the bank tracks the performance of its courier service vendors and monitors success rates in specific geographic regions. Card deliveries in certain areas are assigned to specific couriers based upon the vendors past success rate for delivery in that area.
The biggest lesson learned from this process is that failure to meet the first delivery date greatly increases the odds that subsequent delivery reschedules will be less and less successful, until the intended recipient eventually says, Never mind, I already received a card from another bank, once a courier finally makes contact for a delivery.
With that in mind, the most important element of this new process is improving the rate of first-time courier deliveries. But in order to accomplish that, it was crucial for the bank to understand that it didnt just have a courier management problem; it had an end-to-end delivery oversight and management problem.
By embracing a roadmap that comprehensively addresses all of the issues causing the problem, the bank is taking the necessary steps to ease both the weighty risks of fraudulent card activation and lost cardholder business.
Rajit Bhalla is Genpacts lead unsecured lending subject matter expert worldwide. Miguel Villanueva is a reengineering engagement leader for Genpact in Latin America.