BOSTON — Credit union card marketers' competition has largely abandoned direct mail and is turning more toward branches to market their card products, according to a new report from the Aite Group.
The report, "Overcoming Challenges of Credit Card Issuing," also indicated that most of the issuers surveyed for the report planned to offer better and deeper rewards programs to build activation and usage. It also found that card executives are concerned about potential regulatory and legal challenges on the horizon.
The report reflects data gathered from surveys of 12 card issuers conducted in the month of October 2008.
Although the institutions surveyed indicated they considered rewards programs to be among the most important ways to drive card activation and usage, none shared any details of their coming rewards plans over the coming two years.
The issuers shared other changes they saw coming to help them activate more of their cards and drive usage.
First, they said the next two years may be the age of customization of cards. "Card issuers believe that product customization-the look and feel of a card, as well as the type and nature of rewards a customer can select-will be important to consumer acquisition efforts, as they allow for deeper engagement with the customer," the report stated.
Fees are also going to move up in importance as a way to drive some cardholder behavior and discourage other behavior, the report said. It is possible that some fees may be cut for frequent card users, the report predicted, but that overall interest rates are likely to increase. Should legislation cut or limit fees, such as over the limit or late payment card fees, the report predicted that annual fees on cards may also reappear even though they have not been widely used for the better part of a decade.
The report also estimated that the trend away from direct mail advertising, long a bank card marketing staple and a significant challenge to CUs, is liable to continue over the next two years. In its place, Aite reported that many bank issuers plan on using
their branches to market their cards, an approach
Aite criticized.
"Aite Group believes that issuers are overly optimistic with the idea that branches will be a very successful channel of acquisition," the research firm said. "While branches are ideal for reaching customers who currently have a checking relationship with the bank, the demographics of credit card applicants pose a challenge: The majority are younger (40 and below) and more inclined to use the Internet and ATMs for their banking needs, and less inclined to use branches. In addition, this segment is also the most likely to research and apply for cards online. However, the focus on branches is a clear indication that banks want to go after their existing clients first and foremost."
At the same time, Aite noted that relatively few banks said they planned on marketing their cards through partners or online through Web sites.
Aite also found that bank card executives are worried about regulatory and legislative changes that could cut card income but also make bank cards more like credit union-issued cards.
"Regulators are challenging issuers' way of maximizing profits, including pricing methods, exorbitant and unnecessary fees, unfair application of payment to outstanding balances, universal default, and other credit card practices," Aite wrote in the report. "Among the bills introduced in Congress, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, introduced in April 2008, is taking aim at allegedly abusive credit card practices that prolong cardholder debt. If passed, the CARD Act would significantly reduce credit card issuers' income."
Almost all of the practices being targeted by regulators are those used primarily, if not exclusively, by bank card issuers. As such, card expert consensus is that the proposed changes will not directly affect credit union card programs. But once implemented they could serve to make bank-issued credit cards similar more user-friendly, credit union-issued cards.
–dmorrison@cutimes.com

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Card Marketers Abandon Direct Mail and See Fee Changes on the Horizon

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