Bylined Articles
What Community Banks Should Look for in a Credit Card Program Glastonbury, CT
By Allen L. Nielsen
As we sort through the daily mail, bills are placed in one pile, magazines in another, and credit card offers are immediately ripped, shredded, and thrown into the trash. The average consumer has become immune to the endless number of credit card solicitations that offer special promotions and low introductory rates.
Yet a credit card offer from a community bank may not be trashed so quickly. When there is an ongoing relationship between the customer and the community bank, the letter often gets a second look. Perhaps the customer even responds. Because the customer is familiar with and trusts his or her community bank, that bank is better positioned to gain a customer's credit card business when they offer a competitive product.
What should a community bank look for when selecting a credit card program? Below are some questions a community bank should be asking potential agent banks when looking for a provider of credit card services.
1. What are the risks to the bank? If the community bank is responsible for charge-offs or receivables then there's too much risk. If the community bank must make expensive upgrades in technology to accommodate the card program, then there's too much cost. The agent bank should hold all receivables and incur all charge-offs. Community banks should also be wary if they are required to make significant investments in technology or human resources. Look for an agent bank that does not require you to reassign or hire employees or purchase new equipment to run the program.
2. What are the unique product features? Perks are important in helping to distinguish your credit card program. Agent bank programs should feature travel rewards (e.g., free companion airline tickets, free nights at nationally-recognized hotels) as incentives to use the card. Other perks that stand out among consumers are on-line discounts from select merchants when the card is used.
3. How is the card branded? A credit card should be a community bank card, embossed with its name and logo. This is also true of all related marketing materials, including a link from a community bank's web site to the bank agent's site for on-line statements, bill payment, etc.
4. What is the mix of card offerings? In such a competitive marketplace, there's no room for one card. Consumers with excellent credit expect no-fee platinum cards with low APRs and such benefits as travel, accident and auto rental collision insurance. Look for a program that offers your customers a range of cards based on creditworthiness and income levels to accommodate as many of your bank customers as possible. Don't forget about corporate cards for your business accounts. Many agent bank programs may offer such cards, but they are not on a separate processing platform to accommodate specific uses (e.g., travel and entertainment, office supplies, gas). Only programs with separate processing platforms can offer specialized cards. This is an important feature for business owners to use the cards as an expense management tool and monitor employee spending.
5. How is the card marketed? Bank card programs often fail because customers don't know their bank offers the service. Your agent bank should actively market the cards to your customers. This includes application brochures that are regularly inserted into deposit statements and placed in bank lobbies. Agent bank programs should also be aggressive about promotions, marketing the card during peak times of the year to encourage card use and offering convenience checks and ongoing low-rate balance transfer opportunities. The community bank should have direct input and control relative to all customer solicitations.
6. What does the community bank gain from participating? There should be a tangible financial reward from the community bank's participation in a credit card program. Ask prospective agent banks about incentives for every new account signed by the bank and the number of basis points of net sales as an ongoing revenue stream.
Consumers today are savvy, whether it's shopping for blue jeans or a credit card. While they go for unique, they also seek stability. A community bank credit card offers these seemingly disparate features: A card from a trusted financial institution with features that give them something special.
Allen L. Nielsen is Executive Vice President / CFO of the Bankers' Bank Northeast in Glastonbury, CT. Based in Glastonbury, CT, the Bankers' Bank Northeast provides correspondent products and services to 110 community banks in New England and New York. It is a state-chartered institution that is FDIC insured and a member of the Federal Reserve System and the Federal Home Loan Bank of Boston. Nielsen can be contacted at 860-657-2265 or aln@bankersbanknortheast.com.
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