Demystifying Credit Card Business Metrics: A Deep Dive for Banks

The credit card business is a dynamic and competitive landscape for banks. Understanding key metrics is crucial for optimizing performance, identifying growth opportunities, and staying ahead of the curve. This blog delves into essential credit card business metrics, providing a statistical example for each and exploring future trends.

1. Sourcing Team Setup:

This metric refers to the structure and size of your bank's credit card acquisition team. It includes the number of salespeople, telemarketers, and other personnel dedicated to acquiring new cardholders.

Example: A mid-sized bank might have a dedicated credit card sourcing team of 50 individuals, including 20 salespeople and 30 telemarketers.

Future Trend: Banks are increasingly leveraging digital channels for customer acquisition. Expect a rise in online applications and AI-powered chatbots for lead generation and initial screening.

2. Customer Acquisition Cost (CAC):

CAC measures the average cost incurred by the bank to acquire a new credit card customer. It considers expenses like marketing campaigns, sales commissions, and credit bureau checks.

Example: A bank spends an average of $100 on marketing and sales activities to acquire a new credit card customer.

Future Trend: As competition intensifies, banks may need to explore innovative marketing strategies and cost-effective acquisition channels to keep CAC under control.

3. Turnaround Time (TAT):

TAT refers to the average time taken for a credit card application to be processed and approved by the bank. This includes verification of documents, creditworthiness assessment, and card issuance.

Example: A well-optimized credit card application process might have a TAT of 7 days.

Future Trend: Banks will likely continue to invest in technology and automation to streamline the application process, aiming for quicker turnaround times and improved customer satisfaction.

4. Productivity (Gross CC Issuance/Headcount per Month):

This metric assesses the efficiency of your credit card sourcing team. It calculates the average number of new credit cards issued per team member per month.

Example: If a team of 20 salespeople issues 200 new cards in a month, the productivity would be 10 cards per salesperson per month.

Future Trend: Banks might look to optimize team structures and incentivize performance to boost productivity and maximize return on investment for their sourcing efforts.

5. Segment Focus (HNI, Affluent, Mass Affluent, Mass Market, Corporate):

This identifies the specific customer segments your bank targets for credit card issuance. Different segments have varying creditworthiness, spending habits, and profitability potential.

Example: A bank might focus on the affluent segment, offering premium cards with high rewards and travel benefits.

Future Trend: Banks are likely to become more targeted in their approach. Expect increased focus on niche segments with tailored credit card products and services.

6. Revolver Rate:

This metric indicates the percentage of credit cardholders who carry a balance on their card each month, incurring interest charges for the bank.

Example: A healthy revolver rate for a rewards card might be 25%, meaning 25% of cardholders carry a balance.

Future Trend: As consumer spending habits evolve, revolver rates may fluctuate. Banks might need to adapt their credit card offerings and marketing strategies to attract and retain high-value revolvers.

7. Transactor Rate:

This metric shows the percentage of credit cardholders who actively use their cards for purchases, generating transaction fees for the bank.

Example: A desirable transactor rate could be 70%, signifying a high level of card usage among cardholders.

Future Trend: Banks might incentivize card usage through attractive rewards programs, cashback offers, and contactless payment solutions to drive up transactor rates.

8. Loan Rate:

This metric represents the interest rate charged on credit card balances. It's a crucial source of revenue for banks.

Example: A bank might offer a credit card with a 15% APR (Annual Percentage Rate).

Future Trend: Regulatory frameworks and competition might influence loan rates. Banks need to find a balance between profitability and offering competitive rates to attract customers.

9. Card Churn Rate:

Card churn refers to the percentage of credit cardholders who cancel their cards within a specific period.

Example: A healthy churn rate might be below 5% per year, indicating customer satisfaction and card retention.

Future Trend: Banks will likely prioritize customer retention strategies like loyalty programs, fee waivers, and targeted communication to minimize card churn.

10. Inactive Rate:

This metric indicates the percentage of credit cards that remain unused for a defined period.

Example: An acceptable inactive rate could be 10%, implying most cardholders are actively using their cards.

Future Trend: Banks might employ reactivation campaigns and personalized offers to encourage

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