3 ways regional and community banks can win in the credit card market

Financial institutions of all sizes work endlessly to acquire customers—the people that drive growth and success. Many regional banks and credit unions use a community-oriented strategy that leads to fierce customer loyalty. This loyalty enables financial institutions to win the coveted primary checking account relationship with the customer, but they then concede credit card share of wallet to other lenders. Why are regional banks not winning with their credit card programs when other asset classes are performing well? 

Given top issuers’ access to unparalleled marketing dollars and technology, regional banks often feel outmatched. The majority of the regional market struggles with digital applications and the necessary insights to automate credit, both of which drive down product adoption and profitability. These hurdles, along with a cumbersome entanglement of disparate technologies, result in manual processing that forces many regional players to throw in the towel.  

But there is still hope. Even with intimidating credit card competition, regional banks can utilize unique advantages to better serve their customer base, increase their portfolio and drive revenue growth. They can adopt a digestible and phased approach to credit origination to help drive top-line revenue and profitably scale their portfolio. 

Step 1: Crawl 

Rome wasn’t built in a day, and neither are successful credit card programs. The first step toward portfolio growth is recognizing that customer expectations have permanently shifted. Creating a digital-first omnichannel application experience is no longer optional. In fact, according to CFPB data, 88% of consumer credit card applications are now submitted digitally. 

While it takes a tremendous amount of expertise to understand KYC, fraud and data, regional banks can start small by simply digitizing their application and only automating “easy applications” and clear-cut credit decisions.  

For example, there is no reason to spend precious bank resources analyzing a prospect application with a 480 FICO if the bank has a policy of declining applications below 620. Alternatively, if a customer who has been with the bank for five years has a FICO of 760, holds $25,000 in deposits and has never been late on their auto loan, that application should qualify for fast-tracked approval. This is where access to high-value customer data comes into play, allowing banks to identify low-hanging cross-sell opportunities.  

Step 2: Walk 

This step revolves around automating credit underwriting and fraud mitigation. Being able to decision well is what allows credit card issuers to book more profitable loans and removes OpEx from the lending process. The two key elements here are data and models: 

Data: The platform must be able to ingest identity, regulatory, income, relationship and credit data in real-time, or none of this is feasible. Ultimately, these sources create the 360-degree view of the customer that risk officers need to get comfortable building automated policies. 

Models: Once the bank utilizes centralized data, it must leverage that data to build policies and models for decision-making. While onboarding new data sources may only take weeks, understanding how to leverage digital information to make correct decisions could potentially take years, so tread lightly. 

In the walk phase of growth, banks can begin optimization—according to internal data from Amount’s platform, banks can expect a 90% reduction in manual processing time and reducing app-to-approval timelines to below five minutes. This phase also typically unlocks organic growth of at least 20%. This is the result of better funnel conversion and increased banker confidence to promote a customer-friendly product. 

Step 3: Run 

Once the bank successfully creates a digital customer-facing experience and automates credit, fraud and typical back-end workflows, exponential growth opportunities follow. At this point, running means investing marketing dollars in new growth opportunities within both new and existing channels. As efforts increase to attract and capture a wider selection of applicants, examples of channel growth may include both creating direct mail campaigns and partnering with affiliate channels like Even or Credit Karma. Regional and community banks possess incredible advantages in the credit card space—they serve hundreds of thousands of households with products and services that are essential to their financial well-being. These deep, meaningful relationships and the cross-sell opportunities they present are reason enough to invest in digital origination capabilities.  

By making this strategic investment, regional banks can shape a better banking experience for customers and secure a brighter future for shareholders. No matter where they are in the process, taking the time to find the right technology assists in this journey, providing regional banks with a modern credit card origination platform and—more importantly—digital lending policies and insights that will significantly accelerate their digital journeys. This creates a performance advantage against competitors. 

Carl Moritz is an enterprise account executive at Amount.