It’s Time for Your Card Portfolio Check-Up

You probably “know your numbers” because of an annual biometric screening or physical. But have you ever applied that approach to your debit and credit card portfolio? A simple examination can help you weigh your cards strategy, ensure you’re aligned with your members’ needs and drive healthy results.

Here are some recommendations to help you efficiently guide your portfolio.

Assess the Health of Your Program – and Know Your Members

A card portfolio is most profitable when consumers are activating and using their cards. Prudent examination of your members’ debit and credit card usage patterns – coupled with an understanding of industry trends – can help you discover opportunities that address your performance goals.

Examine your card portfolio holistically to identify strategies that will support long-term portfolio growth. Begin by benchmarking your member data, including:

• Reviewing card activation statistics to track inactive cards or activated cards that have not been used;
• Identifying merchants where members are using your card, and using this information to explore both domestic and international merchant volume;
• Viewing card data by BIN to determine high-performing areas of your portfolio or comparing statistics for old and new BINs; and
• Viewing status trends, such as the volume of cards available for use or reported stolen, and downloading statused card lists to assist in the evaluation of cards to be purged from your rolls.

Then devise approaches and design campaigns that drive targeted members to action. Begin building consumer engagement with mailings that incent and reward members for activating their cards, and supplementing with targeted usage campaigns that will increase transaction volumes and increase consumer spend.

A smartly designed campaign can drive member satisfaction and retention, and add to your overall relationship.

Monitor Your Network Participation

Are you over-networked?

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that issuers participate in no fewer than two unaffiliated networks – to foster price competition and avoid monopolization of transaction routing by a single network. Yet many financial institutions still belong to four or five payments networks.

Perform an analysis of your network participation and performance. Identify your actual interchange income – by network – and pay close attention to interchange transaction counts, monthly interchange totals, switch fees and your net position. With this data, you can:

• Make data-driven decisions that identify the networks delivering the most value to you.
• Identify trends and fluctuations due to merchant activity, market changes and seasonality.

Dissecting your network participation and performance will guide your go-forward strategy.

If you are over-networked, paring down your participation may actually prove that less is more.

Control Card Reissuance

The scene is familiar: You detect real or potential fraud, notify your members and prepare to reissue cards at a considerable expense. The overall process can put your activation and spend rates at risk.

Earlier fraud detection and a more precise way of scoring the risks to individual cards can help you stem fraud losses and restrict the volume of new cards to be reissued. With new in-market fraud tools, you may be able to identify compromised cards from breached locations much faster than the major networks – up to 60 days faster.

Generally, only a small percentage of cards that have data exposed in a breach end up getting used in fraudulent transactions. Having more intelligence about those breaches and exposed data enables you to set specific rules for the reissuance of individual cards and potentially save money.

Issuers that are diligent about reissuance can save on direct reissuance costs and also reduce the odds of longer term losses – if the card is reissued a few times, you may have to worry about activation rates.

When Issuing Cards, Consider Using a Low-Cost PIN Mailer Alternative

PIN mailers for payment cards remain a tried-and-true delivery method for many financial institutions. Generally, when a card is mailed to a recipient, a separate mail piece is sent containing the PIN and instructions for card activation.

But the mailings come with considerable expense:

• They are generally sent to the consumer’s address using the Postal Service.
• More recently, financial institutions have begun using overnight carrier services as a mail alternative.

Today, however, alternative cost-effective delivery methods for PINs are available:

• Email is ubiquitous;
• Text messaging on mobile and smartphones is omnipresent; and
• Online banking promotes two-way communication.

Use newer, lower-cost PIN delivery systems to satisfy your members and improve your bottom line. Consumers are looking for speedy, efficient and safe alternatives – a nice complement to your need to enhance the member experience while reducing cost.

Review Your Transaction Authorization Controls

Transaction authorization controls are the fundamental building blocks for effective transaction authorization processing. Set appropriate parameters regulating the strength of your controls in addressing fraud. Our recommendations are based on the dual goals of providing a reliable member experience and maximizing your reduction of risk.

Set Appropriate Transaction Limits: Limits are used to identify the maximum dollar amounts allowed for specific transaction types (for example, ATM and POS) within a given period of time. These maximum amounts can be specified for online and offline processing by the processor and the branded association. In some cases, limits for signature-based transactions – where a preauthorization request is sent, followed by a completion message – are adjusted each time a preauthorization or completion message is received or a hold expires. This type of limit operates based on activity instead of a set time period.

Review your transaction limits for cash (ATM) and merchandise (POS) activity based on a consumer’s spending profile. Defining appropriate amounts will keep consumers happy while safeguarding against card abuse. (Transaction dollar limits work independently of velocity limits, discussed below.)

Review Consumer Spending Velocity: Velocity support defines the maximum number of times a card can be used for ATM, POS or cash-equivalent transactions within a specified time interval. There is wide variance regarding how individual consumers use their cards, so be sensitive to the differences among your members. Adjust your velocity limits to account for individual member usage patterns for the following transaction types:

• POS transactions (for both signature and PIN);
• ATM transactions; and
• Cash equivalent transactions.

Balance member needs against criminal attempts to “test” accounts to find pieces of data such as PIN, CVV/CVC or the expiration date. Setting appropriate limits for the number of transactions performed in a defined time period is important because it can lead to a more satisfied member.

It’s Fundamental

Successfully addressing consumers’ needs often involves nothing more than executing fundamental tasks. Simple steps can help you fine-tune your card portfolio’s performance without major capital or human resource investment – and keep your card portfolio healthy.

Jim Wilcox is Director of Client Solutions Consulting for Card Services for Fiserv. He can be reached at 860-456-8024 or jim.wilcox@fiserv.com.