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Quick Wins in Credit Card Business
Background:
We were advising a major bank on corporate wide organization restructuring. The CEO of the bank requested that we also deliver profitability improvement in the short term. After a brief analysis, we selected the bank’s credit card arm as our project.
Solution:
Our analysis suggested that there was opportunity to quickly increase outstanding and profitability through statistical scoring to select low risk revolvers (customers that do not pay in full) and come up with initiatives to increase their usage. The initiatives include persuading customers moving their credit card balance from other credit card issuer to the bank.
Result:
The initiatives quickly add loan balance and profitability. During the full year after full rollout of the strategy, the initiative contributed more than 30% of the loan outstanding growth – and even higher contribution for profitability growth since the selected portfolio of customers have substantially lower credit loss than average.
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