There is heavy competition in the credit card market today for the highest credit-quality customers—so much so that one industry CEO likened acquiring new customers to a knife fight. Rewards programs are heating up and marketing dollars are being heavily allocated to promote the benefits designed to appeal to the wealthiest, highest-spending consumers. For example, Visa is devoting more than a quarter of its fiscal year marketing budget to sponsoring the London Olympics and Citigroup and Hilton spent two years developing a perk-laden rewards card that recently launched with style on the rooftop bar of Hilton’s Conrad Hotel in lower Manhattan. Everyone wants to attract the cream of the crop and is sparing no expense to do so.
However, new customer acquisition for credit cards is not just about high visibility sponsorships, glamorous launch parties and providing the best benefits. There are several acquisition strategies that when combined with these marketing efforts not only promote portfolio growth but lead to a competitive advantage. To truly excel in today’s dog-eat-dog competition for profitable customers, instant prescreen, cross-sell and the use of alternative data are strategies issuers can’t afford to ignore. When done well they have a significant impact on acceptance rates, customer loyalty and bank profitability.
A successful cross-sell strategy goes well beyond the adage “Do you want fries with that?” It takes a deep knowledge about your customer to fully understand what matters to them and to make the offer they are most likely to accept. Banks that are showing the most success with cross-sell are capitalizing on the wealth of internal data they have to better understand their customers. They use this intel in combination with instantly prescreening their customers at any point of interaction for a variety of products and then prioritizing the offers (next best offer). These banks are also using advanced analytics to avoid making generic offers and identify the right time to make each offer. Taking the sophistication of the cross-sell process even further, they are adopting enterprise-wide strategies so that customers can receive and accept offers via any channel and those offers are known across all lines of business. This involves the use of an offer repository to ensure customers are not inundated with the same product offer at each interaction and sales scripting to assist customer service representatives with delivering the right message. The visibility of all offers across the institution greatly reduces customer friction. Successful cross-sell uses all of these tactics to drive higher acceptance rates and customer satisfaction by providing offers that are both meaningful to the customer and profitable for the bank.
Many creditworthy customers are being overlooked in the race to acquire the most profitable customers and more data will ensure those on the margins of a bank’s cutoff scores are not dismissed too soon. As more institutions are incorporating alternative data, it is quickly moving from curiosity, to competitive advantage, to table stakes. In the next 2-3 years every significant player will need the additional lift it provides just to keep up. Those who can’t adapt due to legacy technology (or people) will wonder why their risk models constantly underperform compared to their competitors. Recent bank data studies show a 10-15 percent lift in approvals without increasing the risk of default. There’s a window of opportunity now to capitalize on the benefits of alternative data and gain an edge in customer acquisition.
Without a doubt, the credit card market is competitive and becoming more so. Meaningful rewards and targeted marketing activities when combined with robust instant prescreen, cross-sell and data intelligence will pay off in the pursuit of the most profitable customers. Those banks that choose to take a wait and see approach, risk impacting their competitive position. For the moment, using alternative data is like free money. And, as Jimmy Fallon says in the Capital One commercial, “Who wouldn’t want free money?”