Credit card issuers focused on new customer acquisition; should not ignore portfolio management

Leading U.S. credit card issuers have been focused on growing cardholder spending volume in recent quarters (click here for our recent blog on strong growth in credit card volume for leading issuers), but there has yet to be an appreciable rise in outstandings. This is due to cardholders’ desire to reduce their debts, as well as residual reluctance on the part of issuers to open the lending spigot following the financial crisis.

However, we do note that several leading card issuers are ramping up their new customer acquisition efforts:

  • Bank of America grew new U.S. credit card accounts 17% between 2Q11 and 3Q11
  • Chase grew proprietary cards 20% y/y in first 9 months of 2011
  • Capital One card origination levels doubled between 3Q10 and 3Q11

Some of these issuers reduced their customer bases significantly in recent years, so this growth is in fact returning customer numbers to what the issuers would perceive to be normal levels.  The issuers have also focused customer acquisition efforts on certain segments of the market–such as affluents and small business–that they expect will be strong performers in the coming years.

Having concentrated on customer acquisition, it is vital that credit card issuers now also establish portfolio management strategies to maximize customer lifetime value. Effective portfolio management plans focus on three areas:

  • Activation (onboarding efforts, incentives to drive initial card usage)
  • Retention (communications and incentives around anniversaries, processes for handling cardholder complaints, and winback programs)
  • Relationship optimization (periodic special offers based on customer value and/or life events, targeted cross-sell/upsell offers, and consistent user experience across all customer touchpoints)