If you sometimes feel powerless to influence your financial institution’s debit portfolio performance, it is understandable. Many factors go into determining the strengths and weaknesses of a financial institution’s debit portfolio. But make no mistake: debit portfolio performance is something you can influence.
One of the most powerful advantages payment cards provide is the wealth of behavioral data they generate. Unfortunately, many financial institutions don’t analyze their transaction data to formulate strategies aimed at portfolio performance.
It is important to close the gap between having information and leveraging that information to seize opportunities. Using the data at your fingertips can help drive revenue-driving cardholder behaviors, retain profitable cardholders and increase your marketing efficiency.
With minimal effort, financial institutions can improve portfolio performance. Here are three immediate opportunities:
- Increase debit usage in the everyday spend category.
- Improve customer segmentation to tailor marketing efforts.
- Pay closer attention to fraud loss ratios, including the difference between signature and PIN.
Whether the economy is booming or in a deep recession, consumers will need to pay for gas, groceries and utilities. Establishing debit as the payment method of choice for these purchases can have long-term benefits. The first step in assessing debit portfolio performance in everyday spend is to compare it with industry benchmarks. How can you increase everyday spend? Incentives work wonders. Determine the behavior you want to encourage and offer a gift card or a credit to their account.
Don’t send the same message about the same offer to all cardholders at the same time. Through customer segmentation, you can target incentives more effectively. Check the 2014 Debit Issuer Study to see how your debit portfolio performance stacks up against peers. To increase transactions, tailor an incentive for those who only occasionally use their debit card. You don’t need to target everyone – just the cardholders who represent the greatest opportunity for improvement.
Fraud Loss Ratio
Compare the number and dollar value of PIN versus signature transactions per active card to quickly identify looming threats to debit portfolio profitability. Fraud loss ratio is typically higher on signature than on PIN, so if you are too heavily weighted on signature, its higher fraud losses could impact overall portfolio performance. If this is the case, a financial institution may want to promote PIN, especially to those cardholders who primarily use signature debit.
Start Improving Debit Portfolio Performance Now
The time to start using the powerful data at your fingertips to grow and improve your business is now. The first step is to access key metrics, including:
- Debit card penetration
- Average number of transactions
- Average ticket
- Average monthly volume per card
Compare your financial institution’s performance to benchmarks and then develop your strategic plan to move the needle.
If your financial institution has had difficulty getting started with data analytics, take a look at PULSE InSights, a consulting service that leverages our more than 30 years of debit leadership to help financial institutions analyze data and improve their performance.