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Paper Cardholder-level info changing portfolio decisions
DES MOINES (10/18/11)--A new white paper discusses how credit unions can use credit card portfolio data to get an understanding of members’ purchase behaviors. For most credit and debit card issuers, generating reports on the health of their portfolios is relatively simple and yields comprehensive results. But depending on the questions facing the issuer, “comprehensive” may not be the best type of information, said the paper, from The Members Group (TMG). In “The Whole Picture: How cardholder-level data is changing the way card managers make decisions, ” author Brian Scott argues that, rather than relying on aggregate data for examination of overall trends, card managers and executives teams should drill down to the cardholder level to understand their customers’ purchase behavior. In doing so, decisions on everything from marketing to future products become much simpler, he wrote. “As the impact of the debit interchange cap on exempt financial institutions becomes clearer, you will undoubtedly develop a set of solutions to ease the pain of lower interchange revenue,” wrote Scott, TMG vice president of sales. “Among the solutions predicted to be popular with credit unions and community banks is to incent cardholders away from debit and move them towards credit. If you know where individual cardholders are shopping, you can leverage that information to develop credit promotions with particular merchants to increase the chances of your cardholders choosing a credit card option.” Many card issuers regularly run reports to show their top 25 merchants based on transaction volume. But run reports on each merchant individually. “Does that particular merchant attract reoccurring, sporadic, large or micropayments, and how might that knowledge influence the way a credit union attempts to change the purchase behavior of its cardholders? Being able to pinpoint those answers quickly is extremely important as a credit unions evaluates the future of initiatives, such as loyalty programs,” wrote Scott. If a financial institution wants to increase credit transactions to earn more interchange revenue, migrating signature debit customers to credit will be much easier than convincing personal identification number (PIN) debit users. Already signing for their purchases, signature debit users are likely to view a switch to credit as fairly painless. On the other hand, PIN debit users---who are used to punching in their secret codes--may need more convincing. If the card team understands exactly which cardholders are accustomed to using PIN and which are accustomed to signing, they can work with the marketing team to target unique communications--and even unique incentives--to each type of cardholder, TMG said. TMG is a wholly-owned subsidiary of the Affiliates Management Company, which is owned by Iowa credit unions and their members. It provides card processing and payment solutions to credit unions and financial institutions across North America. To download the white paper, use the link.
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