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Meeting 2021 Credit Card Demand: Three Questions to Gauge Your Readiness

April 15, 2021
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I have heard many financial institution executives say that 2021 is the “year of the card” when it comes to loan strategies, and consumer demand appears to be supporting that approach. But to deliver on loan strategies that involve credit cards, financial institutions must be willing to look at credit card offers at all levels.

Loan demand will be on the rise, according to consumer respondents during the 2020 Raddon Research Insights consumer survey. When asked if they anticipate applying for a loan in the next 12 months, 46 percent said yes. That is up from 27 percent indicating they would be applying for a loan in the prior year’s survey.

Loan Demand Soars Amid Pandemic

Almost Half of Consumers Anticipate Applying for a Loan in the Next Year

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Seventy-one percent of those sought-after millennials are even more likely to say they anticipate a loan application in the next 12 months. More than half (54 percent) of Gen X indicated the same. Based on those consumer responses, the demand is there to provide opportunities for loan growth. All generations showed an increased anticipation of submitting an application over the next 12 months, but the highest demand came from the millennials.

Almost Three in Four Millennials Anticipate Applying for a Loan in the Next Year

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This conversation started with credit cards. Demand is there, but are you ready? Find out by asking yourself these questions:

  1. Are we easy to do business with?
  2. Do we have intimate knowledge of where our accountholders have credit cards elsewhere?
  3. Are my credit card features and benefits holding up to the competition?

Are We Easy to Do Business With?

First look at your retail and online application process. Are there ways to streamline and better manage the applications coming into you? Consumers today expect immediate decisioning and the ability to use that new card right away. The bar has been raised with cards like Apple delivering easy application processes, limited questions, immediate decisioning and immediate fulfilment of the product. The card goes into the mobile wallet at the time it is approved. In fact, the card becomes top of the mobile wallet immediately for those Apple purchases – without the accountholder doing anything. Of course, they get the cool titanium card in the mail, but transactions can flow immediately.

That level of experience creates an ease of doing business that is quickly becoming a new expectation. To compete, many considerations are at odds. Financial institutions need to balance credit and application fraud risk with faster and easier approval processes. It’s never an easy task, but you should challenge the status quo to make improvements toward a desired state.

Beyond demanding an easy process to get the card, consumers expect a seamless user experience with all the information they may need at their fingertips. Card controls and access to view both transactions and authorizations allow accountholders to have a greater sense of security and control.

Do We Have Intimate Knowledge of Where Our Accountholders Have Credit Cards Elsewhere?

Your accountholders have other credit cards, and, yes, they are actually making credit card payments right under your nose. But which cards are they really using? Transaction-level, cleansed data will guide you to the top credit card competitors so you can consider opportunities to compete. Once you have them identified, now the work begins for departments across your institution.

Product Management: What is your competitive advantage for each of those competitors? For those that present the biggest opportunities, develop a sales aid or a battle card for your sales team identifying how your offer is better and information about the competitor. Include information about how easy it is to apply, the digital experience, rewards, fees and rates.

Sales Team: Train your organization on the opportunities and ways to engage a potential cardholder to make the switch to you. Be ready to seize the opportunities and ask for the business.

Marketing and Advertising Team: Get personal! Use those sales aids and battle cards to identify messages that become more personal. Of course, you do not need to say, “We know you have a bank card with <<Insert Competitor Here>>.” But you do need to help the accountholder make a more informed or better financial decision if you can beat that competitor with your digital experience or your rewards. Show specifics of savings opportunities if that is your value proposition.

Across the institution, track sales results, accountholder changes, household profitability and campaign results to move the needle and increase sales for your credit cards. As results roll in, be nimble in finding areas to make changes and adapt to continue to see improved success. Above all, remember that your cards need to provide the right features and benefits.

Are My Credit Card Features and Benefits Holding Up to the Competition?

Raddon Research Insights National Research tells us that rewards are important to all generations. Overall, 87 percent of all households own a card with rewards. Reward card ownership increases as you move from millennials through the traditionalists. Younger demographics are more likely to have a store or gasoline card than a baby boomer or traditionalist. Rewards can be expensive, so you want to find the right balance that benefits your accountholders so they keep your card at the top of wallet. Once you fall out of first place, it is easy to get lost in the wallet forever.

Credit Cards – Rewards Dominate Consumer Preference

Rewards Are Strongly Attractive Across Generations and Different Primary Institutions

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With a very strong card portfolio already, one Midwest credit union wanted to evaluate its credit card offers to stay at the top of wallet and provide the right features and benefits for its card portfolio.

Using clean and contextualized or tagged data from their core, the credit union in Michigan has been working to better understand the opportunities of members’ accounts elsewhere. With the help of the Raddon Research and Predictive Analytics teams, the credit union surveyed members with these competitor accounts to help identify opportunities to better compete.

The data showed that members most wanted a lower rate, with 13 percent making that the priority from a rewards perspective. Other important factors were no annual fees, easy access with mobile and cash rewards. It was clear they needed to fine-tune both the low rate and cash rewards card to continue to satisfy current members and entice more members to use their card.

Each of the credit union’s consumer segments prioritized the reward benefits slightly differently. This information, combined with the knowledge of the competitor features, allowed them to personalize their communication when marketing products and be much more personalized and targeted in the ads they present.

Data and Processes = Keys to Success

Consumers are signaling that credit card demand will be high. To capture a share of that demand, financial institutions will need to cross-sell actively to get to the top of wallet and stay there. Remember to focus on the three questions:

  • Is my financial institution easy to do business with? Keep in mind that less is better. Look for ways to minimize up-front questions in the application process. Is the process easy? Can the consumer start and finish the process online or in person without needing additional information or pausing to gather materials? How streamlined is the approval process? What human intervention is required versus desired for the approvals?
  • Do I know where and why accountholders have cards elsewhere? Listen to your current accountholders. Learn from the reasons they are using your credit cards and why they are using competitors’ cards
  • Are my card benefits and features holding up to the competition? Continually review features and benefits to stay relevant with the changing times, changing competition and accountholder needs

By taking a thorough look at your data and processes, you can replace assumptions with facts to guide decisions and your credit card strategy.