Ensuring a Healthy Credit Card Program

Analytics provide insight for financial institutions managing credit portfolios

Making solid credit card portfolio decisions for your consumers and your financial institution is a daunting task, even in average economic times. When unpredictability seems to be the norm, financial institutions need credit card management strategies that will work regardless of economic conditions.

After all, credit cards are important. Our recent Expectations & Experiences quarterly consumer trends research, Cards, Credit and Consumer Control, shows that consumers are more likely to use a credit card for their purchases than any other payment method. And while financial institutions often rely on credit card revenue, they can also accrue bad debt from credit card programs.

In fact, additional data confirms that credit card debt and delinquency are rising. Credit card balances saw their largest year-over-year percentage increase in more than 20 years in Q2 2022, while aggregate limits on cards marked their largest increase in over 10 years, according to research from the Federal Reserve Bank of New York. Transitions into delinquency rose slightly.

Monitoring performance

Since business conditions change rapidly, managing a credit portfolio efficiently requires continuous review of transaction data, which can be accomplished with analysis tools and managed services tailored for financial institutions.

You can gain meaningful information to help you:

• Optimize your portfolio by using industry best practices
• Increase cardholder spend through better credit line management
• Leverage predictive capabilities to improve delinquency management

Delinquency management

Your first concern, of course, is delinquency. Because you’re extending a line of credit to a substantial base of cardholders, you must conscientiously monitor your program’s performance to ensure you’re not accumulating bad debt.

While the majority of your cardholders pay on time, your at-risk credit card account strategy should be proactive and hands-on. An assertive approach – empathetically delivered – can help reduce the risk of losses that could occur due to accounts being written off.

Predictive analytics can help you determine the likelihood of an account going delinquent. This will enable you to actively advise and assist your cardholders before they miss a payment. Data analytics can signal just the right time to initiate appropriate contact with a consumer to bring the account current. Most cardholders facing negative economic circumstances will appreciate a consumer-friendly touch that provides guidance and assistance to help minimize the impact of financial stress.

Analytic tools such as Delinquency Management from Fiserv offer access to data you can analyze to not only identify at-risk accounts, but also provide discrete direction and insight to proactively salvage account balances and client relationships. Such timely intervention will help preserve your relationship with your cardholders and favorably position you as a financial service partner and advisor.

Overall portfolio management

Managed services such as Credit Decision Manager from Fiserv can help evaluate your entire portfolio, reducing risk within individual accounts and enhancing portfolio performance. A managed services provider can deliver strategy consulting and design aligned with your growth aspirations as well as sophisticated capabilities such as estimators, champion/challenger testing and detailed reports.

These services can help:

• Reduce bad debt
• Grow revenue through improved credit decisions
• Contain operational expenses
• Manage workloads efficiently
• Enhance the customer experience
• Improve regulatory compliance

Moving forward with confidence

As the economy moves forward, be sure you’ve done all you can to preserve and protect your credit card portfolio, ensuring its viability and addressing the long-term needs of your financial institution and cardholders.