With its 25th consecutive year of service to organization issuing credit cards, R.K. Hammer and its research and analysis division, Card Knowledge Factory, are expanding a series of best practice offerings to credit unions who desire to grow their card operations, and enhance card member experience.
Agent member credit card programs gained steam again last year and are poised for a good 2015. However, 60% of those in the agent programs last year achieved a medium performance level, offering some sales training and average rewards, but lackluster results.
The payments cards industry profitability has been in the dumper since 2009, but is slowing crawling its way out over the past six years. Payment investment banker and guru R.K. Hammer says this year credit card ROA’s could top 4%.
Anyone paying attention knows credit unions and banks have had their card interest income business models under siege since 2008. So it no surprise that renewed attention has been turned instead to fee income models, and ways to boost that increasingly important revenue stream.
The number of payment card portfolios sold in 2014 dipped to just five portfolios worth $2.7 billion. This was down significantly from year end 2013 and the record card deals done in 2012. In 2013 an estimated $17.2 billion in 10 portfolios were done, not including numerous tiny card portfolio sales ( < $10MM).
CardWeb.com’s CardExecs database of payments industry movers and shakers today features Robert Hammer, CEO and Founder of R.K. Hammer.
Regulation and legislation have again effected every portfolio revenue variable: including total revenue, interest income/fee income split, thus seeing issuers respond by assessing new fees and repricing existing fees, where permissible. However, R.K. Hammer’s annual state-of-the-industry report notes the CFPB still has yet to fully catch its stride, so even more regulation will likely be…
While most segments of the payment card issuing business are saturated with targeted products, there remains a potentially lucrative market segment that has not been fully developed. The “Near Prime” segment represents new card account applicants who live on the border of becoming prime, but they are just not yet there.
One of the most important and widely accepted card profit metrics is to “risk-adjust”‘ top line revenue. This is defined as the total revenue yield (all fees and interest) less loan losses. The trend recently has been greatly improving and very instructive.
Much has been made of card industry fees for many years. Congress and regulators, journalists and card members, all have joined in. It seems there is no end in sight to fee income as the proverbial punching bag.
Internationally-known payments industry advisor, R.K. Hammer, has reached its quarter century mark, providing value-added card solutions to financial institutions in the U.S. and in 50 countries abroad. Company Founder and CEO, Bob Hammer, noted, “To have provided essential card advisory solutions to so many successful organizations along the way is very gratifying and humbling to us. Equally important is to have worked for decades with such talented global card executives and their teams on best practices helping them achieve higher levels of card member satisfaction and financial performance.”
There comes a time when some agent card programs elect to pick a new service provider. Perhaps because of erratic service level performance at the current provider, or due to new account rewards which seems to be less than competitive market value, because a current contract has reached its contractual period ending, or even due to an existing provider exiting from that business.
Whatever the reason(s), there are number of preliminary steps one must go through to ensure the change is a smooth one for your card members and meets your expectations. In managing over 800 such agent card programs over three decades in the card business, R.K. Hammer has some strong opinions about how to achieve the best outcome.