5 Ways Community Banks & Credit Unions Can Compete in Credit Cards

The credit card market is dominated by large national issuers with deep pockets, national scale, and many products. The competition is formidable, but not unbeatable. Community and regional financial institutions have their own advantages, including local, personal data. If they leverage those advantages, they can succeed beyond expectations.

Chase, Bank of America, Capital One, Discover, and other big issuers cast a long shadow over the U.S. credit card market. And now Apple, in partnership with Goldman Sachs, has joined the party just in case things weren’t interesting enough.

The marketing staffs of these giants number in the hundreds, and their access to the latest tools, technology, and investment dollars seems limitless.

Given all these apparent advantages, how can a regional bank, community bank, or credit union expect to compete?

There are always ways that smaller players can compete if they know how to go about it. Success hinges on mastering five key strategies. By focusing on their strengths and unique differentiators, community and regional players can strategically deepen customer relationships and drive growth in their credit card portfolio.

1. Leverage the Unique Data You Have in Hand

When cross-selling credit cards to your existing retail banking customers, community and regional institutions have a distinct advantage over national banks: the data from existing checking, deposit, and lending relationships. That provides unique insights into consumers who already do business with you: spending patterns from their debit cards; their net worth from deposit and wealth accounts; their borrowing habits from loans.

Using that existing internal data, you are also more likely to be able to identify key life events correlated with a need for credit — like a recent house move or a new child — before national competitors would catch on. Use that data to personalize offers and messaging and to drive timing and cadence of offers.

Do your credit card products offer consumer bonuses for deposits or other product relationships? Make those perks and bonuses real for people by detailing how the products they already have with you will increase their credit card earnings. The more you can speak to consumers’ personal situations based on timely and relevant data, the more they will feel a connection to your brand and an openness to considering your offer.

2. Take Advantage of All Channel Interactions

Your retail banking customers are coming to your branches, visiting your online banking website, and logging into your mobile app — likely on a daily basis. These are unique, personal, and one-on-one interactions you have with consumers that national card issuers cannot replicate through mass channels like TV or display. Use these interactions to your advantage to start a conversation about credit cards.

Train your branch and contact center staff on your card products and equip them with probing questions to engage customers in a conversation about whether their existing credit card is meeting their needs. Often, the simple question “Did you know we offer credit cards?” can lead to a productive dialogue with consumers.

Additionally, you can use in-app and on-site ad space and interstitials to make card offers to likely responders. For example, if customers visit your website’s credit card page, the next time they log in to your online banking or mobile application, show them a credit card offer.

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3. Rationalize and Revamp Your Product Suite

In today’s credit card space, for most customers, “cash is king.” While you may never dislodge affluent customers from their airline miles credit card, many people love the simplicity of a cash-back credit card. If your product lineup doesn’t include one, consider adding one to card products and launch it as soon as possible.

“Cash-back credit cards lend themselves to clear, straightforward messaging about how easy it is to earn cash on card transactions.”
— Marc Bellanger, Merkle

If you do have a cash-back product, conduct a competitive scan against national and regional issuers to verify that your value proposition is competitive with today’s market leaders. Most issuers have a product that has an effective earn rate of about 1.5% — anything less and you run the risk of irrelevance. Remember that cash-back credit cards lend themselves to clear, straightforward messaging about how easy it is to earn cash on card transactions. For today’s busy consumers, this message resonates.

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4. As Others Drop Features, Promote Yours

Many credit cards are cutting back on features and benefits beyond the core rewards/cash earn. In the past year, Chase and Discover, among others, have stopped offering some traditional benefits like car rental coverage. Also, many cards still charge foreign transaction fees. If your card offers robust ancillary benefits or does not charge some common fees, use these as points of differentiation. If it doesn’t, consider adding them.

Additionally, think creatively about card benefits. What relationships do you have with local merchants who could supply a card benefit? How can you add real value through perks or unique experiences that national issuers cannot execute at scale with local merchants? Identify these opportunities to differentiate your card and pull these benefits into your marketing collateral. Make sure to reinforce them during a cardholders’ lifecycle so that these key benefits remain top-of-mind.

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5. Rely on Payment and Marketing Partners

Remember that you don’t have to go it alone. Reach out to payment partners like Visa or MasterCard, both of whom have a wealth of information and knowledge on best practices. They also have syndicated marketing programs and sponsorship opportunities that can make your card program feel like one of the big institutions.

Other partners like credit bureaus or data processors also have off-the-shelf products such as propensity models or risk scores that can give your marketing a leg-up. Tap into these resources to learn what’s working in today’s marketplace. Also, ask your marketing partner or agency what expertise they can bring to the table. Do they have a relevant card experience that will allow you to make smarter decisions or avoid the need for basic testing?

Finally, industry forums and webinars can provide you with analyses and insights that you cannot get from a small credit card portfolio. By stitching together best practices, tools and ideas from these sources, banks and credit unions can give their card program an impactful boost.

Community and regional institutions may not be able to beat the national players on scale, but they can beat them on strategy.

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