7 steps to develop profitable credit card business for a credit institution

Most banks and consumer finance companies in Vietnam have been showing they are very ambitious with credit card business development. I think this is the right move as credit card business can help credit institutions develop their client base, promote their brand name; and it’s a sustainable and profitable business.

However, the problem I observed so far is that most of the them failed to execute this ambitious plan, lose commitment and change strategy to less focus and investment on credit card over time. Some organizations are still commitment but struggled to make the business profitable.

I was lucky to have a chance to join projects to set up successful credit card business for some organizations. From my work experiences, observations and research in credit card industry, I see there are 7 key steps to help a credit institution develop sustainable and profitable credit card business.

Step 1: Develop long term and strategic fit for credit card business

Board of directors and top senior managers in the organization are required to have a long term investment and commitment if they want to develop this business. The first step, they can appoint a working group, consists of experts in credit card business. These experts can be internal or external. Main responsibility of this working group is to write the strategy papers in which organization resources and capabilities are matching to capture the opportunities in the market.

This can be done through client segment selection, product development,  marketing activities, acquisition & distribution planing, risk management, operations, technology and client cycle management.

Step 2: Develop good business case

Standard business case will cover 5 years. From my experience, at the time we develop business case, the more details we have the higher possibility we can achieve. So, spend quality time to collect all information including cost items, revenue items, well-defined economic model, NPL assumptions, …

We can take reference from external sources such as industry reports, card associations, central bank and credit state agencies.

This business case should be concise and realistic as much as possible.

Step 3: Create differentiated client value proposition

Be client centric thinking we you develop product and design value proposition. Make it different with your competitors and appealing to your target clients.

Think about your client issues and help them to resolve by your products. Be their trustworthy partners, it’s not just purely a lender to make profit. This will work for all client segment, regardless lower mass, upper mass, affluent or High Net Worth Individuals (HNWIs).

Creating values for your client requires you to be very creative, spend lots of time and efforts to brainstorm but it’s very rewarding.

Step 4: Provide exceptional client experience

Think about all touch points that your clients will experience. Imagine and design all the client journeys.

These touch points can be your brand appeared on above-the-line or below-the-line channels. They are also your public website, contacting by sales team, client correspondences (SMS, email, forms, T&Cs…), client facing services channels (internet banking, SMS Banking, 247 Contact Center, branches/transaction offices). Your single staff is also a touch point with client.

Make sure every these touch point will create a good impression for client.

Step 5: Develop effective sales channels

Be creative to plan and develop your sales channels. Think about digital channel, it’s emerging now. Think about partnership, convert your partner’s clients to your clients. Approach big companies, convert their staff to your clients.

Think about cross-selling, up-selling and put credit card in the ecosystem of products your company are providing to clients.

Step 6: Manage risks and control NPL

Build a solid platform to manage credit risks. Develop credit underwriting center and specialized collection teams.

Develop and enforce KYC and Due Diligence procedure at sales process. Establish fraud application prevention unit. Deploy technology to automate fraud risk management.

Continuously review and improve credit portfolio to balance credit risks and business objectives.

Step 7: Implement strong BI platform to support business growth

BI platform will help better analysis, planning and monitoring the business targets. It also helps to drive all activities to the right directions by providing insight information. For example, with BI reports, you can analyze where your clients spend, for what and when. Based on that, you can create card usage promotion campaigns and with BI support, you can measure how successful the campaign is.

Hope this could provide some thoughts to enhance your credit card business. Feel free to share your comments or ideas that was missing here.