FIS CardLifecycleManagement Strategy

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Cardholder LifecycleManagementJim Sheahan, VP Card Services, FIS


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Agenda

Whats changed?

Whats the same?

Opportunities

Cardholder lifecycle management

Acquisition strategies Activation strategies

Usage strategies

Retention strategies

Risk management

Questions and answers

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Whats changed?

No area, aside from the

mortgage industry, hasseen a greater impact

from the credit crisis than

has the credit card

industry.


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Whats changed?

Its not just the economy CARD Act

Debit card usage recently exceeded credit($ and trans):

Displacing cash and check

Picking up small ticket transactions

Not stealing much from credit Generation Y:

More comfortable with debit

Very engaged in social networking and green initiatives

Consumers are taking control of their money:

They are more aware of the costs of credit

Have been reducing debt and spending within their means

More engaged in their credit score and how to improve it

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Whats changed?

Card offer trends:

More cards offered with annual fees

Many offers have higher APRs

Lower credit lines

Small business: Same as above

No protections from CARD Act

Most issuers have reduced credit lines(as much as 30%), very few doing opt in

Penalty pricing really tough to execute

Consumers payment trends Cards first

More difficult to price risk fewer cards, lower profitability

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Whats the same?

Credit cards can still be a profitable product for financial institution.

Its a mature market which means cut-throat competition.

Multi product customers tend to perform better across all products.

Two-thirds of cardholders surveyed said they would consider switching their primary

credit card if a better feature were offered. (Source: ComScore, September 2008)

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Community Financial Institution

Opportunities

The current economic situation has created new opportunities for community

financial institution:

Increased interchange

New customer acquisitions

Better positioning against larger institutions

Stable balance sheets

Increased consumer demand to do business with community financial institutions

Loan origination growth

This is something that community financial institutions need to capitalize on now

In the area of credit cards, this means a focus on Cardholder Lifecycle Management

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Cardholder Lifecycle Management

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Acquisition


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What features are important?

To better understand the state of

credit in the U.S., Forrester surveyed

consumers who have recently

opened a new credit card account.


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Whats important?

No annual fees 57% overall

Brand name I can trust 29% overall

An attractive intro offer 26%

Cash back rewards 23%

Rewards choice 15% Other rewards, discounts, etc important

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Direct Mail

Direct mail solicitations are on the increase.

Increased 47% in Q4 2009 compared to Q3 (source Mintel Comperemedia)

Industry stats for direct mail card solicitation programs result in a response rate of


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Loan Origination

Three important factors to consider with loan origination:

Instant decisions

Immediate access

Identity theft protection

Consider new tools FICOs CCI score(Credit Capacity Index). Identification Verification (IDV) assesses whether the presented identity

information on the application is accurate.

Identification Authentication (IDA) a real-time, interactive solution that verifies

consumers are who they say they are

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Loan Origination

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The Web is now the

preferred method for

loan applications.

In a recent Aite survey,36% of new accounts were

processed through

the online channel.


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The Small Business Opportunity is

Growing Rapidly

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$15 Trillionglobal opportunity2

27 MillionU.S. small businesses1

$5 TrillionU.S. opportunity3

+ 20%5 yr average annual card spend growth4

Source: 1) US Small Business Administration, 2008,; 2) Boston consulting Group, 2008;3) Dove Consulting, Migrating Small Businesses Invoice Payments from Paper to Plastic 2008and 4) Nilson Report 2002-2008


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Small Business OpportunitySmall Business Card Opportunity is Significant and Relatively Untapped

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Small Business Commercial Consumption

Expenditure (CCE) 2007

Business Card Spend

(6.9%)

Non-Business Card Spend

(93.1%)

Total = $4.7T

Opportunities

Gain new acquisitions in a mature market

Small business is the largest opportunity left in

the credit card space.

Increased interchange

Business card will earn you increased interchange

compared to consumer cards.

Visa and MasterCard both have major

focuses on the small business market.

Source: Visa Commercial Consumption Expenditure Index; Economist Intelligence Unit (EIU)modeling and analysis, June 2008. Results include retail and wholesale intermediate inputsand are estimates only; government sources typically publish actual within two years ofestimates. U.S. CCE index data sources include the Bureau of Economic Analysis (BEA) andU.S. Census Bureau, which conducts the Retail and Wholesale Trade Surveys

Source for GPC Volumes : Visa Operating Certificates; Amex Earnings Supplement; TheNilson Report #909; Analysis and Calculations by Visa U.S.A. Inc.


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Small Business

Credit cards are now the most common source of financing for Americas small-

business owners. (Source: National Small Business Association survey, 2008)

Nearly 50% of small-business owners identified credit cards as a source of financing

that their company had used in the previous 12 months more than any other

source of financing, including business earnings.

Larger banks reeling in credit lines

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Activation


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Cardholder Activation

Activation is key.

Card carriers and activation stickers offer an excellent marketing opportunity

Welcome kits can range from a simple letter and terms of agreement to an expensive,

multi-component package

Personal Identification Number (PIN) mailers are often driven by form and function ratherthan effective communication

Card benefits reminder mailings reinforce the buying decision and stimulate usage

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Most popular reasons for non-activation:

Its just my backup card.

I threw it in a drawer somewhere.The rate is too high.

The credit line is too small.

I got a better rate on another card.


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Increase Activations

A compelling, rewards-based activation and retention program that will help you

rebuild relationships and increase revenues

Provides cardholders the needed incentive to begin and maintain use of their

credit cards

Weve experienced an average activation rate of 50%

Cost of activation recovered within 90 days after program completion just from

interchange

Increased retention and broadened account relationships (40% of activated accounts

continue to use their credit card a year later)

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Usage


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Increase Usage

Credit cards are responsible for more than $2.5 trillion in transactions a year and are

accepted at more than 24 million locations in more than 200 countries and

territories. (Source: American Bankers Association, March 2009)

The key to increased usage is to connect with cardholders and provide:

Adequate credit limits

Reinforce card security and protections

Offer incentives and rewards

Promote your product enhancements

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There is a myth that debit is displacing credit. Debit is

growing significantly, but not at the expense of credit;

its at the expense of cash and check.

- Chris McWilton, MasterCard president of U.S. markets


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Rewards Will Increase Usage

Visa says rewards cards now make up more than half of all credit cards and about

80% of money spent on a credit card. (Source: Aite Group, January 2008)

Consumers say rewards are the second-most important reason for choosing to

apply for a specific card, behind no annual fees and ahead of low interest rates.(Source: Aite Group survey, January 2008)

More than one-third of consumers choose which card to use in order to maximize

card rewards. (Source: ComScore, September 2008)

What to look for in a rewards program

Self-funded program with comprehensive cost analysis review

Consider points, merchant funded and cash back programs

Consistent cardholder experience

A program that qualifies for increased interchange

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Multi Product RewardsRelationship Rewards

Definition

Relationship Rewards is a program that rewards cardholders for the total value of their

relationship beyond just a single product.

Program Features

Enhanced profitability of cardholders by driving increased usage of products and services

Improved retention rates

Competitive advantage in the marketplace

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Retention


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Retaining Good Cardholders

Manage customer inquiries and complaints effectively

Select, train and empower staff

Resolve issues promptly

Encourage customers to call with feedback; show you care

Champion the customer not the card account sync strategies

Educate customers on credit scores

Implement loyalty and best customer programs

Use rewards in the form of rebates, reduced rates, waived fees, value-added coupons, etc.

Communicate card benefits

Use distinctive card design that reflects cardholder status

Actively manage credit lines and possible product upgrades Formalize an account recovery process

Slow attrition with offers of price incentives, fee waivers, etc.

Train staff in listening skills and communication tactics to convey key messages

Send reinstatement letters supported by outbound telemarketing

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Online Account Access

71% of survey respondents said they have logged into their credit card account via

the Internet. (Source: ComScore, December 2009)

Your online presence should:

Provide 24/7/365

Decrease calls to your customer service representatives

Increase cross-sell opportunities

Ensure that your cardholders understand all the features and benefits you offer

Provide access to personal financial management tools

Make it easy for your users with single sign on

eZCardInfo.com and MyCardStatement.com are the online tools provided by FIS

Complimentary marketing materials to help you promote to your cardholders

Visit www.fisglobal.com/mycardstatement or www.fisglobal.com/ezcardinfo to access

Flash demo

Branch poster and table tent

Web banner, statement insert and a splash page

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http://www.fisglobal.com/mycardstatementhttp://www.fisglobal.com/ezcardinfohttp://www.fisglobal.com/ezcardinfohttp://www.fisglobal.com/mycardstatement


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Financial Management Tools

According to a 2010 Aite survey,

nearly 70% of financial

institutions will put significant

emphasis on offering personal

financial management tools totheir customers.

Providing financial

management tools can:

Increase account balances with

their primary financial institution Increase cross-sell product

purchases and loyalty


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Risk Management


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Fraud is Top of Mind

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Card fraud is the

No. 1 fear of

Americans in the

midst of the global

financial crisis. Concern about fraud

supersedes that of

terrorism, computer

and health viruses

and personal safety.

(Source: Unisys SecurityIndex: United States,

March 2009)


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Risk Management

Aite Group estimates that the total cost of card fraud in the U. S. $8.6 billion per year.

Use encryption technologies when communicating sensitive information.

Key components to help control fraud risk exposure:

Fraud detection Fraud analytics

Chargeback services

Cardholder interaction

Education and client support

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Summary

The landscape has changed

Focus on the entire relationship Deposits are key

Community and regional banks can gain ground

Small business opportunities

Focus on all phases of the lifecycle

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Jim Sheahan

[email protected]

Thank You
mailto:[email protected]:[email protected]

Documents

FIS CardLifecycleManagement Strategy